In 4Q15, Fidelity Information Services (FIS) acquired SunGard, expanding its top line by nearly 50.0% and entering the capital markets and asset management businesses (XLF). The deal, which closed in November 2016, is expected to hit FIS’s net profitability for some time due to the debt load it created. SunGard has almost tripled FIS’s debt ratios. FIS’s ability to generate cost and revenue synergies remains to be seen.
With SunGard, FIS could have more than $9.0 billion in annual revenue. Its rival, Fiserv (FISV), reported $5.2 billion in revenues for 2015, and DST Systems (DST) generated $2.8 billion. SunGard is expected to boost FIS’s revenues 40.0%.
SunGard, with its strong pipelines, is expected to create opportunities for cross-selling FIS products. Once SunGard is completely absorbed, FIS is expected to surpass its rivals (JKHY) (C). That’s because FIS could expand beyond North America in the core account processing market to become a global software vendor to the broader financial services industry.