When M&A specialist Jordan Brown at MarketWise Advisors told me that we were going to experience the heaviest tech M&A spree ever, he wasn’t kidding. In just the last month there have been three high-profile mortgage technology vendors getting acquired or acquiring others. The goal seems to be who can be more end-to-end as compared to the next guy. With assets cheap it makes sense to buy, but I wonder if the goal of offering an end-to-end technology can ever be fulfilled.
We saw Wipro Technologies, the global IT services business of Wipro Limited, and Citigroup Inc., a global financial services company, reach an agreement for Wipro to acquire Citi Technology Services Ltd., the India-based captive provider of information technology services and solutions to Citi entities worldwide, for an all cash consideration of approximately $127 million. As part of the transaction, Wipro and Citi will sign a Master Services Agreement for the delivery of Technology Infrastructure Services (TIS) and Application Development and Maintenance (ADM) services for a period of six years. The agreement provides for the delivery of at least $500 million in service revenues over the period of the contract.
Based in Mumbai and Chennai, Citi Technology Services provides IT services to Citi and its affiliates around the world. Citi Technology Services has grown tremendously since its inception in 2005, and today has approximately 1,650 employees trained in Citi processes and technologies, servicing Citi businesses in more than 32 countries. Citi Technology Services’ revenues are expected to be approximately $80 million in CY2008.
ISGN got in the act when it purchased Richmond Title Services, Plano, Texas, as part of its title business cross-sell strategy. RTS is one of the top 25 independent title agents in the US and has more than 40 employees. According to ISGN, the plan is to cross-sell RTS's services to existing ISGN customers as well as through ISGN's e-services platform, Lenstar, Bridgelink and the MORvision Plug-in Partner Network. A plug-in will be written for all Dynatek MORvision customers.
ISGN said in a prepared statement that the acquisition will help ISGN gain market share in the title business by leveraging ISGN's knowledge process outsourcing onshore and offshore processing capabilities. No sale price was disclosed.
Now Global financial services consulting firm Headstrong has acquired business process outsourcing firm Lydian Data Services, Boca Raton, Fla. The sale price was again not disclosed, but all LDS staff will be retained as the objective is to grow the LDS business further. However, within the next three to six months the LDS name will be grandfathered and the business unit will be dubbed Headstrong Business Services.
With the acquisition of LDS and its platforms, Headstrong will position itself as a consulting firm that can offer a full suite of services from consulting and implementation to mortgage processing to its global clientele. Further, according to Headstrong, the acquisition of LDS will strengthen Headstrong's U.S. operations, through the addition of processing centers in Atlanta and Boca Raton.
Why are these companies acquiring now? As I mentioned, they want to offer the mortgage industry an all-in-one solution. I’m not criticizing these deals, in fact they all make good business sense. However, is it possible to really be end-to-end? I don’t think so.
Logic will tell you that no one company or person can be great at everything. Why is it increasingly important to be great at everything nowadays? With the need to originate better quality loans and increased regulation lenders can’t afford to settle. The core system will always be the lender’s bread and butter, but it’ll have to be increasingly flexible to accommodate seamless integrations to best-of-breed players.
I just think when lenders settle for an end-to-end solution just because they don’t want to deal with several vendors they’re sacrificing quality. Don’t you agree?
