Tuesday, 6 October 2015

From $120m to $20m in less than ten years: how not to do business

Source: getty images
So, as FIS is busy with the takeover of fellow US vendor Sungard, the latter is shedding business that is not likely to be of any use to the new owners. Thus, the core banking software unit – known as Ambit Core Banking – has been sold to rival banking technology provider, Silverlake Axis.

Nothing unusual, one might say, businesses are bought and sold all the time. True, but how many large international fintech firms have managed to lose $100 million of business value in less than ten years?

Ambit Core Banking originates from System Access, a Singapore-based banking technology provider. Its retail core banking offering, known as Symbols, has been around since the late 1980s and gained good traction in Asia.

Sungard purchased System Access in 2006 to gain a foothold in the core banking software space and to take Symbols to the European and the US markets. It splashed out $120 million on this acquisition.

The anticipated growth, however, did not materialise and the business got somewhat lost in Sungard’s 100+ other acquisitions. The management, development, resources, investment and client pools have dried up…

In 2015, Malaysia-based Silverlake Axis bought its once major competitor – now a mere shadow of its former self – for $20 million.

Ambit comes with around 50 customers and two main products: core banking system (back office) and branch automation platform (front office).

But here is another thought… perhaps the business was not worth $120 million to begin with?

Sungard has been known for overpaying for products. There were talks of a trading energy solutions company purchased a while back by Sungard for $170 million valued internally at just $17 million.

There were also mishaps with the quality of the purchased products. Those with longer memories might recall the case of Infinity Financial Technology (a US provider of trading and risk management software) – acquired by Sungard for $390 million in the late 1990s – only for its product to be discontinued less than two years later. The tale at the time was that at closer inspection the product turned out to comprise hundreds of spreadsheets. The ex-Infinity developers, meanwhile, used some of the funds from the sale to set up their next venture, Calypso Technology.

As for Sungard, its net debt at the time of the acquisition by FIS stood at $4.16 billion.

By Tanya Andreasyan,
Senior Editor, IBS Intelligence

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