With its recent acquisition by Fiserv Inc., banking and credit union customers can stop worrying about the financial stability of Open Solutions Inc., and again look forward to enhancements to the company’s core product, the DNA platform.
On Jan. 14, Fiserv announced it had acquired Glastonbury, Conn.-based Open Solutions, which had been previously backed by the Carlyle Group and Providence Equity Partners.
Brookfield, Wisc.-based Fiserv is the third largest provider of financial services technology on the FinTech 100 ranking. Fiserv has approximately 16,000 clients, which include lenders, billers, mortgage companies, leasing companies, brokerages and investment firms. The company is valued at approximately $11 billion.
Open Solutions is a technology provider to banks, credit unions and thrifts. It is 36th on the FinTech list. Open Solutions has 3,300 clients worldwide, including 800 core processing clients. One half of its clients are credit unions, and Open Solutions was the first company to offer an applications store for developers of add-ons in the credit union market. Its flagship product, the DNA platform, offers real-time account processing capability that serves multiple charter types, multiple languages, and multiple currencies.
Fiserv paid a reported $55 million for the technology company and assumed approximately $960 million in debt from Open Solutions. Under the deal, Fiserv also receives a tax asset with a net value estimated at approximately $165 million.
Heavy Debt Load
The amount of debt that Open Solutions was carrying was a major catalyst in the sale, according to David Mitchell, former chief product officer and chief marketing officer at Open Solutions. Mitchell joined Avon, Conn.-based core processing firm COCC earlier this month as chief partnership officer.
“They were looking to find financial stability,” Mitchell said of executives at Open Solutions in the weeks leading up to the acquisition. “They were carrying a lot of debt, and there were a number of vehicles they were taking a look at. The Open Solutions team wanted to reinvest in the product themselves, but their hands were tied. Fiserv won out in the end, and this will help keep investments into what is one of the best products in the industry.”
In a bid to raise funds at the time, Open Solutions had gone public in 2007, Mitchell said. “What they didn’t anticipate was the economic crisis – the recession – and they couldn’t recoup on that debt.”
That debt has proven to be an albatross hanging off the company’s neck, causing concern with clients in the marketplace. In fact, Mitchell said he spent a lot of his time in the new role at COCC fielding questions on the financial health of Open Solutions.
“Our biggest concern [at COCC] was that we are one of the largest resellers of Open Solutions, and there was a lot of financial insecurity about the company,” Mitchell said. “With the acquisition by Fiserv, it takes away that part of the conversation.”
Key Products Included
In addition to the DNA platform, the other key products in the Open Solutions line include DNAcreator, a developer’s toolkit that enables developer to create their own applications for the DNA platform; and DNAappstore, an app store for programs that are created with DNAcreator. Fiserv is also acquiring the CUnify and TotalPlus account processing platforms from Open Solutions; as well as Weiland Account Analysis for commercial account analysis; and the company’s consulting practice Faddon Financial Group.
Mitchell sees the acquisition as a positive move, which will broaden Fiserv’s reach, protect and enhance the core Open Solutions products, and ultimately benefit customers with new product features. Fiserv had launched its Acumen product in 2009 to directly compete against DNA. The company has already announced it will begin adding some of the Acumen features to DNA.
“This is an extremely advantageous acquisition for them to acquire the product, and to get a tremendous reseller base with the COCC,” Mitchell noted. (The COCC actually sells the DNA platform rebranded as Insight).
“We anticipate, and what we are excited about, is that we can take advantage of some of the auxiliary products that Fiserv makes and wrap them around [COCC’s] core product [Insight] to sell,” Mitchell said. “They are very strong on payments, for example.”
Looking ahead, Mitchell is bubbly on the potential long-term impact of the acquisition for his member-clients.
“I really believe they have the best platform in the world. If they really invest in that product, and continue to work with a reseller like us, we could really revolutionize financial services,” Mitchell said.
Email: dweldon646@comcast.net
