Credit-card and payment processor TSYS has never been shy about going after a company it finds attractive and complementary to its core business of helping banks and retail merchants conduct transactions with their customers.
That was fully apparent in the Columbus-based firm’s $2.35 billion acquisition of Hauppauge, N.Y.-based merchant specialty firm TransFirst nearly 16 months ago. That company has now been neatly folded into the TSYS revenue stream and is paying solid cash-flow dividends.
And TSYS management, along with its board of directors, also has shown the willingness and financial capacity to jump into lines of business in which it previously had little or nothing to do with, such as its $1.4 billion buyout of Austin, Texas-based prepaid card distributor NetSpend in 2013. That company also is contributing nicely to the TSYS bottom line.
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At its core, in corporate parlance, it’s called mergers and acquisitions. That actually is one of the possibilities in which regional banking company, Synovus Financial Corp., has been mentioned in the past as it recovered from the Great Recession and, ultimately, became profitable once again.
The Columbus-based bank is on very solid footing now and finds itself looking at other financial institutions that it might be interested in bringing into its own fold. Synovus Chairman and Chief Executive Officer Kessel Stelling has said more than once that it is flattering for his company to be thought of as a merger candidate, and that he and the company’s board of directors have the fiduciary duty to its stock investors to listen to any responsible offers.
That fiduciary requirement, of course, would apply to TSYS or even Columbus-based supplemental health and life insurer Aflac — if a quality suitor with pockets of money should arise. That goes with the territory of being a publicly traded company adhering to federal regulations and U.S. Securities and Exchange Commission oversight.
But despite a research analyst’s thoughts earlier this week in an Investor’s Business Daily article that TSYS itself could be a possible merger candidate by a larger financial firm, TSYS executives on Tuesday sounded as if the company remains purely on the hunt for more top-notch companies it might buy at some point to improve sales and profits.
During a conference call after releasing its second-quarter earnings report Tuesday, Barclays research analyst Darrin David Peller asked TSYS execs about their thoughts on strengthening the company with M&A opportunities in the near term, amid “a pretty active M&A environment.” TSYS in its earnings report noted it paid off $125 million of its debt in the second quarter.
To put it bluntly, TSYS Chairman and CEO Troy Woods said his firm is ready to pull the trigger on any sound acquisition opportunity that comes through its doors. In other words, it’s ready and willing to play the M&A game despite acquiring two companies in the past four years at a combined price of $3.75 billion.
“We’ve got a wonderful, diversified portfolio — the issuer processing business, the merchant business and, of course, the self-banking prepaid business,” Woods said to Wall Street analysts on the call. “We’ve also been pretty consistent, I think, in the past about a couple of things. One, we do feel like we play where we want to play in those three segments. No. 2, we are actively looking at opportunities in all three. We see opportunities that literally come through here weekly. I think we’ve indicated before that M&A is still a very high priority for the company. It continues to be in all three segments.”
Paul Todd, chief financial officer at TSYS, chipped in that the card and payment processor and employer of nearly 5,000 people in Columbus — and about 11,500 worldwide — is “entering a period” during which the company will have more balance sheet flexibility that will allow it to execute a strategic purchase if need be.
In essence, that means the cash flow that TSYS now has pumping through its financial veins puts it in more of a position to be a buyer than a seller. And that’s even if the company is still carrying a decent amount of debt from its previous large acquisitions.
“We (can) obviously flex that (earnings to debt ratio) up like we did in our TransFirst acquisition. We also did it in our NetSpend acquisition,” Todd said on the call. “So we have a track record of flexing up when we need to and then using our free cash flow to de-lever (pay down debt). So we’ve got capacity.”