Last year saw the multi-billion dollar acquisition by banking and payments technology provider Fidelity National Information Services (FIS) of SunGard Data Systems. This was the largest deal that SunGard have undergone since a group of private equity firms, including Blackstone Group, Silver Lake and Bain Capital, paid $11.4 billion for the company in 2005. bobsguide spoke to Raja Gopalakrishnan, executive vice president of international markets at FIS about the recent acquisition, what results we can expect from the 2015 M&A boom and what the future holds for these two innovative companies.
Could you provide some background to the acquisition of SunGard?
Prior to the acquisition, FIS was focused primarily on the banking and payments sector, working across multiple markets. SunGard were operating in a similar way to FIS with a focus on capital markets, asset management and wealth solutions. As both organisations were market leaders in their respective spaces, the acquisition made immense strategic sense to us. Through the combination of both companies, we are now truly able to provide our customers with a portfolio targeted at financial services across the complete value chain, and are uniquely positioned to help transform the way our clients do business.
How will these market leaders continue to be innovative in the future?
As we look forward into the future, we must take a look at what market forces are going to be prominent. Digital is going to be a big thing, cutting across multiple businesses: digitisation is no longer a fad or a trend and it will be something that underpins everything that people do. Our initial innovation strategy is to partner with customers while they are on their digital journey. In addition cybersecurity, risk management and security are key areas in which innovation should be concentrated, and both FIS and SunGard are big players in these areas. We can provide the first, second and third lines of defence for our customers’ businesses and ensure that they have technology that is responsive, and able to work on demand to meet expectations. Alongside this, disruption from new players is continuing to be a trend and people are making logical moves, like those in the retail space, seeking out gaps within the payments industry that they can enter.
What is your response to this change?
Our response to these disruptors is to explore how technology that has been focused on banks and financial institutions, can be repurposed so that it can be used by new players in the market. In relation to this, more and more customers are moving away from ownership to on-demand technology. As all institutions start to focus on their core competencies, we can offer front and back-end capabilities with a layer of customisation that is aligned with a strategy that the company wants to adopt.
Why do think the number of mergers and acquisitions are increasing?
We are seeing a lot of market developments that are throwing out opportunities for consolidation because in the technology solutions industry, increased expertise results in being able to deliver greater value and breadth of services to the customer. On many occasions, it is a question of scale and in our case, we have the relevant scale. This acquisition broadens our specialization into new financial services segments, by combining FIS traditional areas of strength with SunGard’s extensive experience in capital markets, asset management and wealth solutions. It made sense to bring both entities together so we can innovate and address the most pressing aspects of the financial industry at large on a global scale. We are also committed to investing between 5% and 6% of our revenue back into innovation.
How was FIS affected by the financial crisis?
As far as the financial crisis goes, we were not impacted directly as we are not a financial institution, but we were affected indirectly through our clients. Having said that, we did see a postponement of certain buying decisions and discretionary spend within financial institutions. But the beauty of having a balanced product portfolio like ours is that despite the aforementioned reaction on the one hand, on the other hand we saw customers asking for advice on how we could add value and bring down their total cost of ownership. During the crisis, many pockets of the emerging markets remained unaffected or relatively less affected. In these markets, where we have a strong presence, we continued to do business and grow in a profitable manner. Having said that, now that you have recovery in established markets where there is the potential for increased investment in technology, we expect these markets to really grow in terms of longer term contracts and newer solutions - that’s how we see it playing out over the next few years.
What are FIS’ plans for 2016?
The key focus for us – as we bring together these two large companies, creating the financial technology leader with the broadest range of solutions and domain expertise – is to empower our clients and transform the way they do business. We’ll be looking at all the opportunities that present themselves and delivering value to customers across all areas of the business.