D+H Acquires Fundtech – What’s in it For Fundtech?

D+H in Toronto has entered into an agreement to buy Fundtech from the Chicago private-equity firm GCTR, which bought the payments company in 2011. Fundtech has 1,500 employees and 19 offices. D+H will pay $1.25 billion in cash for Fundtech for a 4.75 multiple based on 2014 revenue. This is the second major acquisition in the fintech world by a Canadian company (OpenText buying GXS the other).

I must admit I had to scratch my head a bit at this one, at least from the Fundtech perspective. D+H operates in the small to medium-sized banking and credit union space. Fundtech’s product portfolio is squarely centered on payments through any channel for multiple instruments (wires, checks, mass payments, etc.), standards (SWIFT, ACH, RTGS, etc.) and transactions (domestic, cross border, etc.). It also provides cash management, financial messaging (including SWIFT, SIC, CLS, Fed and Chips, among others) and receivables and payables automation solutions. For providing these infrastructure services, Fundtech has built a revenue base that many P2P vendors would envy.

Fundtech’s flagship cash management solution, Global CASHplus, enables financial institutions to provide their corporate customers with a cash management solution that allows them to consolidate treasury functions, integrate ERP and treasury management systems, automate payables and receivables, and manage working capital efficiently, effectively and with transparency. CASHplus provides corporates and banks a common infrastructure for supply chain finance, cash management and trade finance. Fundtech has talked a good game around financial supply chain with their Global CASHplus solution, but the bank input is that Fundtech’s strength is working with payment engines as opposed to client facing projects.

Key features of Global CASHplus include

  • Payables
  • Receivables
  • Balance and Transaction Reporting
  • Cash Flow Forecasting
  • Corporate Liquidity Management
  • Supply Chain Finance
  • E-Trade
  • Remittances
  • Electronic Invoicing

Fundtech’s supply chain finance product is Asia focused, and last I checked they a few clients in Malaysia, India and the Philippines using their supply chain finance solution. They do not directly sell working capital solutions to corporates, but via banks. They are not actively selling supply chain finance in North America. Fundtech’s EIPP solution came from the acquisition of Accountis and according to bank contacts, is U.K.-centric.

So together D+H and Fundtech will have a combined 8,000 clients, but are there really combined synergies between 2 entities? According to D&H's CEO, Fundtech will propel them into the payments software space. According to the press release,

"Other 'mega trends' that the CEO sees as beneficial for the Fundtech/D+H business comprise 'the proliferation of new payments channels, banks' focus on high margin transaction banking, outdated legacy platforms, and complex and growing regulatory compliance environment."

So I completely understand why D+H bought Fundtech from their private equity owner. I just wonder what’s in it for Fundtech?

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