Fidelity National Information Services (FIS), a leading financial services technology provider, aims to grow by focusing on strategic acquisitions. This push for expansion comes at a reasonable time, especially after the recent sale of a significant portion of WorldPay to GTCR, which substantially reduced the company’s debt from $19.1 billion to $10 billion. With this financial restructuring finalized, FIS actively seeks to expand through mergers and acquisitions. Let us analyze how FIS looks to grow by acquisition and how it will impact the fintech industry.
Key Takeaways
- Shift to Smaller Acquisitions: FIS is pivoting towards smaller, strategic acquisitions instead of large-scale transactions. The focus is on enhancing revenue growth through targeted investments in key sectors like payments, digital banking, and commercial lending technology.
- Annual Acquisition Budget: FIS has allocated approximately $1 billion annually for acquisitions. The goal is to find businesses generating $150 million to $200 million in revenue, targeting products or businesses with established EBITDA and revenue rather than developing new products in-house.
- Operational Focus: CEO Stephanie Ferris emphasizes sharpening execution, maintaining focus, and enhancing delivery processes. This approach aims to leverage existing products and improve operational efficiency to accelerate revenue growth.
- Financial Health and Growth Targets: FIS’s strong financial performance, including consistent earnings and increased share repurchase programs, underpins its strategic measures. The company aims for annual adjusted revenue growth of 4.5-5.5% and improved EBITDA margins from 2025 to 2026, reflecting confidence in its financial stability and growth potential.
FIS Looks to Grow by Acquisition
FIS Shifts Focus to Strategic Smaller Acquisitions Under CEO Stephanie Ferris
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Just a few months after sealing a major transaction in her career by selling a 55% stake in the Worldpay business to GTCR, a Chicago-based private equity firm, Stephanie Ferris, CEO of Fidelity National Information Services (FIS), emphasizes that the company’s ambitions are not yet satisfied. Now operating as a leaner entity, FIS is shifting its focus back to acquisitions.
Previously, FIS had indicated plans to target smaller acquisitions, particularly within its capital markets division, opting to steer clear of billion-dollar transactions. FIS’ CFO, James Kehoe, noted that while grand-scale acquisitions are not on the horizon, the company is keen on making smaller, strategic purchases to enhance revenue growth. The strategy involves accelerating top-line growth through selective, smaller-scale acquisitions, making it highly improbable for a billion-dollar buyout to occur anytime soon.
Under CEO Stephanie Ferris, FIS is honing its focus on key sectors such as payments, digital banking, and commercial lending technology. The company’s strategy emphasizes multiple smaller acquisitions over large transactions, enhancing adaptability and ease of integration within its current operations.
Ferris noted that FIS is setting aside approximately $1 billion annually for acquisitions, targeting small, complementary products that are either outside their current portfolio or that cannot be developed in-house swiftly. Unlike last year’s acquisition of Bond Financial Technologies, a banking-as-a-service startup, which was primarily an acquihire, FIS now seeks to invest in products or businesses that already established EBITDA, revenue, and a robust business model.
Ferris elaborated on the company’s operational strategy, pointing out that creating new products isn’t necessary at this stage. For a company to capture FIS’s attention, it should generate between $150 million and $200 million in revenue. Below this threshold, FIS considers it not a full-fledged business but merely a product lacking a sufficient customer base.
“We have all these products. We need to sharpen our execution, maintain focus, and enhance our delivery processes,” she said. Ferris believes that by continuing on this path, FIS can accelerate revenue growth in the banking sector.
FIS has demonstrated strong financial performance, consistently exceeding earnings expectations over multiple quarters, highlighting the success of its strategic measures. In the previous year, the company posted revenues of $9.8 billion, with its banking sector division contributing $6.7 billion and the capital markets division adding $2.8 billion. Furthermore, FIS increased its share repurchase program by $500 million, raising the total to $4 billion by the end of 2024. This move reflects its confidence in its financial health and stability.
At its Investor Day in 2024, FIS outlined its medium-term financial plans, setting ambitious targets for revenue and earnings growth. The company plans to leverage its strong foundational technology, crucial to the global financial system, to sustain and grow profit. It expects annual adjusted revenue growth of 4.5-5.5% and improvements in adjusted EBITDA margins of 40-60 basis points annually from 2025 to 2026.
Under Ferris’s leadership, FIS is focusing on disciplined capital management and strategic acquisitions, aiming to maintain and enhance its position in the fintech industry. This strategy emphasizes utilizing core strengths and competitive advantages to spur innovation and growth within the evolving financial technology arena. It reflects a commitment to delivering significant returns to shareholders while seeking growth, embodying a balanced approach to value creation and stakeholder engagement in the competitive fintech space.
About FIS
Fidelity National Information Services Inc. (FIS), headquartered in Jacksonville, Florida, is a global provider of financial services technology and outsourcing services, employing over 55,000 people worldwide. As a leader in the industry, FIS focuses on various sectors, including retail and institutional banking, payments, asset and wealth management, risk and compliance, and outsourcing solutions.
The company offers payment processing, banking software, and technology outsourcing services. With its extensive portfolio of solutions, global reach, and deep expertise, FIS supports over 20,000 clients. Recognized as a Fortune 500 company, FIS is also listed on the Standard & Poor’s 500® Index, underscoring its pivotal role in powering the financial sector.
Conclusion
Under the leadership of CEO Stephanie Ferris, FIS is poised for growth through strategic acquisitions. After significantly reducing its debt by selling a stake in WorldPay, FIS is now focusing on smaller, targeted acquisitions with an annual budget of $1 billion. This approach aims to enhance revenue growth in key areas like payments, digital banking, and commercial lending technology.
The company seeks established businesses that generate substantial revenue and avoid the need for in-house development. With substantial financial health and consistent earnings, FIS aims for annual adjusted revenue growth of 4.5-5.5% and improved EBITDA margins by 2026. This strategic direction underscores FIS’s commitment to leveraging acquisitions for sustained growth and innovation in the financial technology sector.
