The planned merger of Fiserv [NASDAQ:FISV] with First Data [NYSE:FDC] is likely to kick off a round of consolidation among financial software companies and payment processors, five sector advisers said.
A key player in the potential talks will be FIS [NYSE:FIS], Fiserv’s major competitor in banking software, the sector advisors noted. Jacksonville, Florida-based FIS may want to follow Fiserv’s lead and acquire a payment processor for merchants, they added.
A logical target for FIS, with a USD 34bn market cap, is TSYS [NYSE:TSS], two of the sector advisers said. Columbus, Georgia-based TSYS, with a roughly USD 16bn market cap, competes with First Data in some areas of payment processing for merchants and providing technology services for banks to issue credit cards.
Brookfield, Wisconsin-based Fiserv and New York-based First Data, which have been growing slowly with single-digit percentage revenue gains last year, are aiming to use their deal to cross-sell their products into new distribution channels and achieve wider scale. The USD 22bn all-stock merger announced last week is expected to close in 2H19.
FIS did not return requests for comments. TSYS declined to comment.
by Yizhu Wang, Jay Antenen and Bhavna Kaul