Two of the nation’s biggest financial technology companies are joining forces in a $22 billion merger that could have major ramifications for metro Atlanta.
Wisconsin-based Fiserv announced Wednesday it will acquire Sandy Springs-based First Data in an all-stock transaction that will create what Fiserv CEO Jeff Yabuki called the world's biggest "FinTech" company.
The newly expanded Fiserv will be based in the Milwaukee area, but Atlanta will likely be the largest employment center for the combined operations. First Data CEO Frank Bisignano said the metro area will remain a critical strategic center in the future.
Fiserv and First Data aren’t household names for most consumers, but the two Fortune 500 companies help make electronic payments possible, whether it be with the swipe of a debit or credit card at a retailer or for purchases online. The companies serve banks and merchants across the globe.
“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information,” Yabuki said in a news release announcing the deal.
Payments processing is a critical and often overlooked part of the global economy. Georgia is the payments capital of the United States. Companies with major presences in the state process some 70 percent of all debit, credit and gift card transactions in the nation each year, according to the American Transaction Processors Coalition. The industry supports more than 40,000 jobs in Georgia, according to the trade group's research.
Atlanta’s historic position as a banking hub and Georgia’s friendly regulatory climate have helped foster a broad financial technology ecosystem in the state that has cultivated companies such as Equifax, First Data, Global Payments, InComm and TSYS.
But the payments world has been rocked by upstart competitors in online and mobile transactions, such as Square, and Wednesday’s announcement could trigger other players to begin scouting rivals to bulk up and build scale.
The Fiserv deal is expected to close in the second half of this year, pending shareholder and regulatory approvals. Yabuki will remain the company’s chairman and CEO, and Bisignano will be serve as president and chief operating officer.
The impact of the merger on metro Atlanta isn’t clear, but cost “synergies” — in this case, the elimination of duplicative corporate structures, streamlined technology infrastructure, increased operational efficiencies and process improvements — are among the motivating factors of this transaction.
The companies said they expect the deal to create about $900 million in cost savings over five years, “achieved across the combined organization.”
In an interview, Bisignano did not say how many cuts might take place in metro Atlanta but stressed the region’s strategic importance. He said much of the cost cutting would come through consolidation of facilities, changes in vendor contracts and changes to corporate infrastructure.
“Atlanta is a hugely, hugely important presence for us,” Bisignano said. “The combined company probably has its largest headcount in Atlanta.”
Asked if that will continue after the merger, Bisignano said: “100 percent.”
First Data is based in a tower along Ga. 400 in Sandy Springs, though many top officers are based in New York, and Fiserv has significant operations in Alpharetta.
Roger Tutterow, a Kennesaw State University economist, said mergers often lead to job cuts and other operational changes.
“I wouldn’t panic,” Tutterow said. “I think Atlanta’s status as a hub for FinTech clearly lowers the risk of a massive scale back here in Atlanta.”
Yabuki said the company plans to invest $500 million in future years developing new products and services.
“Because it’s a fast-growing industry, I think the savings will be deployed in developing new product lines and I hope the impact on employment in Atlanta should be reduced,” Tutterow said.
In the near term, consumers are unlikely to see much difference.
Yabuki said the marriage will tie together First Data’s strengths in processing payments from merchants with Fiserv’s dominance among banks and other financial institutions.
The past 11 years have been bumpy for First Data. In 2008, on the eve of the financial crisis, the company was bought out and taken private by private equity giant Kohlberg Kravis Roberts.
First Data endured years of steep losses spurred by the buyout, which loaded the company with debt. But over the past few years, the company has spent billions to upgrade its infrastructure and develop new technology.
Hidden under the debt, Yabuki told analysts Wednesday, is a strong company that has spent years innovating. The combined company will refinance the debt, relieving some of that burden.
First Data shareholders will control about 43 percent of the company and Fiserv shareholders will control the remaining 57 percent.
The $22 billion price for First Data amounts to about a 30 percent premium to the company’s recent share price over the past five days, the release said.
What is Fiserv?
What the company does: Fiserv is a payment processor and also a giant in mobile and online banking services.
Headquarters: Brookfield, Wisc.
Employees: About 24,000 at the end of 2017.
2018 Fortune 500 ranking: No. 487
CEO: Jeff Yabuki
Financials: Fiserv said Wednesday it expects to report full-year revenue of $5.82 billion in 2018, up 2 percent from 2017, and profit of up to $1.29 billion last year.
Sources: Fiserv, Fortune Magazine, and AJC research
What is First Data?
What the company does: First Data makes checkout systems for retailers and other merchants, processes payments and provides online banking, automated teller machines, makes payment cards for financial institutions.
Headquarters: Sandy Springs
Employees: About 22,000 worldwide at the end of 2017.
2018 Fortune 500 ranking: 254
CEO: Frank Bisignano
Financials: First Data said Wednesday that it expects to report full-year revenue of $9.5 billion in 2018, down 21 percent from the year prior, and profit of $1 billion for 2018.
Sources: First Data, Fortune Magazine and AJC research
The impact of the proposed $22 billion merger of Fiserv and Sandy Springs-based First Data isn’t fully known. The Atlanta area is a huge employment center for both companies, and job cuts and other cost savings are a major driver of the deal. First Data CEO Frank Bisignano said Atlanta will remain a major strategic center for the combined company.