One Equity Partners last week agreed to acquire ACI Worldwide’s corporate online banking offerings for $100 million in cash. The entity will operate independently under the new name, Dragonfly Financial Technologies. The deal is expected to close in the third quarter. PE Hub reached out to Chip Schorr, senior managing director, for his thoughts on fintech deals in general and on the Dragonfly transaction in particular.
What’s driving banking technology deals?
Banks’ ever-growing customer needs are driving increasingly early and robust adoption of technology solutions. Banking remains a highly competitive industry. The explosion of fintechs and neobanks have increased the competitive landscape even further. The successful technology providers in the space offer deep solutions and maintain robust customer relationships, which provide a strong base on which to build. PE is attracted to these strong companies and the fact that there are significant consolidation opportunities available.
What’s special about ACI’s corporate online banking offerings?
Dragonfly Technologies (“ACI corporate online banking”) is a gem. The solutions are mission-critical to their banking customers, and those banks’ important corporate customers, enabling seamless electronic payment management. We believe ACI did a terrific job replatforming the offerings and creating a leading cloud-based solution with a deep feature set. This is a solution purpose built for the next twenty years, with significant opportunities to add adjacencies to offer the customers an even deeper solution set. Furthermore, Dragonfly is one of a limited number of players with the full capabilities required to service the needs of the leading financial institutions. Banks place significant value on partnering with leading solution providers who can deliver world-class service.
What is the growth strategy?
We are excited to work with the Dragonfly management team, who have articulated a very detailed organic and inorganic growth plan. We see multiple growth vectors for this business through the expansion of its dedicated sales resources, increased international presence, investment in product adjacencies and of course M&A, which is always a hallmark of an OEP investment thesis.
How does this deal expand OEP’s exposure to financial technology and software?
I have substantial experience growing fintech businesses throughout my career. For example, I helped the I-Flex management team build that company from a corporate carveout, like Dragonfly, growing it into the world’s leading retail banking software platform until it was eventually acquired by Oracle. We are excited to bring this experience, our network of experts and relationships, and our capital to Dragonfly.
Tell us how OEP’s expertise in executing complex carveout transactions comes to bear in this deal?
One Equity has deep corporate carveout experience – almost half our deals in our current fund are carveouts. We believe that we have mastered how to work with and be good partners with the former parents, while having the toolkit necessary to disentangle the former subsidiary and rapidly create a robust stand-alone company. Having done carveouts over more than two decades, OEP believes that it is the partner of choice for large corporates looking to divest assets to a responsible partner who has successfully done this over and over again. In the technology vertical, carveouts represent an even higher proportion of our deals, and we view these types of transactions as very important to our franchise.
What are the exit opportunities for fintech companies these days in general and for this property in particular?
Our plans for Dragonfly are to scale the business organically through investment, while we pursue all of the inorganic opportunities available. We believe there will be innumerable options available to us if we execute the detailed plans we have designed with the management, and seize the organic and inorganic growth opportunities that are in front of us.
What’s the future for deals in banking tech?
Given the importance of technology in financial services, and the mega-trends to continue to move physical world transactions virtual, the future of transactions in banking tech is very robust.