Fiserv Acquires EDS Credit Union Division for $218 Million in Cash

BROOKFIELD, Wis. and PLANO, Texas – Anti-trust was not an issue for the Fiserv/EDS Credit Union Industry Group deal. In lightning speed, the two firms have already closed on a deal, with Fiserv acquiring the EDS’ CUIG for $218 million in cash. EDS will retain $12 million in CUIG receivables. Prior to this acquisition, Fiserv already had six credit union data processing subsidiaries. Its six existing CU core processors – XP Systems, Users, Aftech, Summit, CUSA Technologies and Galaxy – have approximately 2,300 core CU clients. Add the 900 from EDS, and it’s approximately 3,200. Fiserv says it now has 34% of the entire credit union core processing market. But if you’re talking credit unions over $25 million in assets, Callahan & Associates recently completed technology survey pegs Fiserv’s market share at 40%, and that’s prior to the EDS acquisition. (See related story page 86.) The Department of Justice conducted an inquiry into possible anti-trust, but did not find cause to block the deal. According to the companies, the EDS CUIG supports about 1,500 CUs, with 900 being for core processing. The other 600 are clients for online banking, EFT services, file transfer, and others. The group’s annual revenue is approximately $115 million. The EDS’ CUIG employs 450 people, all of who will become Fiserv employees. Those employees are scattered around the country, including Madison, Wisconsin; Orlando; Auburn Hills, Michigan; San Antonio; and St. Louis. Scott Butler, president of the EDS group, will stay on as president under Fiserv. For EDS this sale is part of an overall strategy to sell off what it believes are non-core, non-strategic assets. Once this deal closes, EDS will have raised some $544 million in cash under its divestiture program. Last month in a meeting with analysts, EDS CEO Mike Jordan said the company will continue to make moves to ensure it is concentrating the bulk of its efforts on its IT outsourcing business. That means getting rid of business lines like the credit union group. In 1999, EDS sold off its community bank core processing business. That is now known as Aurum Technology and it markets to credit unions. This isn’t the first Fiserv/EDS transaction. The two companies hooked up last year when Fiserv bought EDS’ Consumer Network Services subsidiary, an EFT subsidiary. Butler said he is excited to join Fiserv and hopes investment into the EDS products will be increased. “Certainly since I took over in April of 2002 my message to EDS leadership was we need to increase products and services, we have needed investment. It hasn’t happened to the level I felt we needed,” said Butler. He’s confident that Fiserv is committed to credit unions and willing to invest in supporting them. He also hopes to see more specific product marketing. Much of the group’s marketing efforts so far have been tied to the overall EDS branding strategy. Butler said the EDS CUIG has some innovative products many CUs may not know about. For example, it has a very successful file transfer operation up in Madison, Wis., known as Crossroads. “It allows you to transmit files from any location to any location and any format to any format,” said Butler. He said these files are transformed so they can be used for the core system. It’s a useful service for CUs getting data files from shared branching, item processors and other providers. Butler said EDS CUIG will remain in Plano, but the group will be moving out of EDS facilities some time this year. Fiserv has already dropped EDS from the name and for now will keep the CUIG name. It plans on creating a new name for the division in the near future. Historically Fiserv takes a hands-off approach with acquired companies and let’s them compete with sister companies. Butler said that will be new for him as EDS hasn’t done much of that, but he’s ready. ” One thing this does for Fiserv is bring a lot more mid-sized CUs into its mix. While EDS has clients over $1 billion, it has a good number of mid-sized CUs. (See sidebar for EDS’ core CU DP offerings.) Credit union data processors have been using acquisitions as a way to gain marketshare of late. Recent mergers include Open Solutions’ acquisition of Liberty Fitech Systems; Harland Financial Solutions’ acquisition of Premier Systems Inc.; Aurum Technology’s acquisition of Computer Consultants; and Symitar’s acquisition of CU Solutions. -