In 2015, Fidelity National Information Services (FIS) acquired SunGard, expanding its top line by nearly 50% and entering the capital markets and asset management businesses (XLF) (XLK). The deal, which closed in November 2015, is expected to hurt FIS’s net profitability for some time because of the debt load created by the acquisition. SunGard has almost tripled FIS’s debt ratios, while its ability to generate cost and revenue synergies remains to be seen. With SunGard, FIS stands to take in over $9 billion in annual income. Its rivals Fiserv (FISV) and Jack Henry & Associates (JKHY) earned $~5 billion each in revenues in 2015.
“At FIS, we are driving innovative solutions and delivering high-quality client experiences that move our clients’ business forward each and every day,” says Gary Norcross, president and CEO of FIS. “This acquisition creates one of the broadest sets of technology assets and market expertise in the industry, and allows FIS to present new opportunities to our existing client base as well as to financial services markets that we have not historically served.”
SunGard, with its robust pipelines, is expected to create opportunities for cross-selling FIS’s products. Further, once SunGard is completely absorbed, FIS is expected to surpass its rivals as it will be able to expand beyond North America in the core account-processing market to become a global software vendor to the broader financial services industry.
In the next part of this series, we’ll look at how FIS rewarded its shareholders in 2Q16.