Business
Huge Hungarian success story: Tech giant Misys acquires IND Group
IND Group acquired by Misys.
Hungarian success story sold - This is how it all began... IND Group has announced on Monday that Misys has completed its acquisition of IND Group, the leading innovator in digital channels solutions.
“This deal delivers the broadest retail banking solution in the market by adding world-class consumer-oriented solutions to leading core banking capabilities," Misys said in a presentation showing how the deal creates value for its customers. IND Group becomes a division of Misys “Digital Channels".
IND co-founder and managing director Balázs Vinnai, who was elected Businessman of the Year by Ernst & Young in 2013, will head the new division and will be member of the tech giant along with IND Group management and team.
ING Group started up as a garage company in 1997. According to céginfo.hu data, it was founded with a HUF 15,000 registered capital. Initially it offered web design services and website development. Its first successful banking products, banking software were sold as the supplier of German IT company Brokat. The one making this connection was Roland Pecsenye, co-founder of the firm. Through this German connection IND gained a good reputation among financial institutions.
How high did they rise?
In 2003, IND bought up Brokat and its electronic banking division, when the company found itself in trouble due to the burst of the Internet bubble. After this acquisition management set a new path for the company and started to develop their own products. Up to this point IND was dealing in the development, tailoring and integration of other companies’ software.
The new product development model that placed customers in focus, worked out perfectly. IND was the first ever in the world to develop Facebook Payments for a Polish bank that allowed the bank’s customers to make transfers using Facebook. It also created a mobile application that allowed sending money knowing only the phone number.
IND presented its newest product, Essence, late last year. Essence Mobile Banking was officially launched in Finovate Asia 2013, held in Singapore on 14 November 2013. The 7-minute demo introducing the app was voted Best-of-Show by the audience.
Essence, a next generation mobile bank, is a banking front-end through which financial institutions can provide first class services for their customers. Built around the customer and their most used mobile banking functions - balance enquiry, transaction history and money transfer - IND Group created a fast and easy-to-use mobile banking app that provides an exceptional customer experience that exceeds users’ expectations. The programme is capable of transforming data into charts or other visual information, allowing customers to keep track of their finances more easily. The banks may also send tailor-made offers to their customers, i.e. Essence also has the function of a sales channel.
By now IND Group has more than 250 employees in eight offices worldwide, with 30 clients in 18 countries, including Poland’s Alior, Austria’s Erste Bank, Belgium’s Beflius, Switzerland’s UBS, French BNP Paribas and Austrian Raiffeisen’s Zuno Bank.
It is the first company in this region to make it to the FinTech 100 ranking, released by IDC Financial Insights, a leading provider of independent research and advisory services company, American Banker and Bank Technology News, SourceMedia’s leading publications for banking and financial services professionals. The list includes the top global technology providers to the financial services industry.
How much could IND be worth?
The incredible growth rate at the company is perfectly attested by the fact that its sales revenue grew to its 23-fold between 2000 and 2003, but the rate over the past years is also convincing. Realising the potential in the company private equity company Euroventures invested in IND in two rounds: first in 2007 and then a few years later with a total of EUR 4.4 million, acquiring a 28% stake in IND. Even after these transactions the founders still owned more than 70% of the company. IND’s revenues have grown by nearly 75% since 2010 and management projected sales of over HUF 30 bn to be achieved within four to five years, with 80% coming from abroad already today.
Assuming, which is not exaggerated at private equity investments, that expected annual return is around 30% of the invested funds the company could ask about EUR 16.3 m (HUF 5 bn) for the Euroventures stake alone. Extrapolating the total purchase price from this we could arrive at up to EUR 58.3 million (nearly HUF 18 bn). This is an extremely ballpark estimate, as most likely the price greatly depends on the future performance of IND and how successful integration and the use of potential synergies between the two companies prove to be (read more about synergies below).
A similar company, Digital Insight, was acquired by NCR last December at a steep price of 16x EBITDA (USD 1.65 bn), according to certain calculations. With IND’s 2013 revenues and 30% assumed EBITDA margin the company could have reached EUR 4.8 m EBITDA. At 16x Misys could have made a bid of up to EUR 76.8 m (HUF 23.6 bn) for IND.
Motivation for the purchase
Misys was delisted from the London Stock Exchange in mid-2012 when it was bought up by Vista Equity Partners. Misys, which has annual revenues of nearly 1 billion US dollars, is present in 120 countries, with 2,000 clients and 4,500 employees. It has been in partnership with IND since March 2013, in scope of which it was selling the digital banking products of the Hungarian company. Misys has decided , however, that it will expand its own portfolio by purchasing IND’s front end technology, as this way it can offer end-to-end services to its clients.
As to why Misys picked IND Group the tech giant gave the following reasons:
- Completes comprehensive, market-leading banking proposition along with Misys core and branch banking solutions
- Provides the most comprehensive set of front-office solutions in the market, adding value to all customers
- IND Group customers have won over 11 awards for their implementations over the last 2 years (IND Labs produce the most exciting innovations in the market and it offers leading-edge user interface design and user experience)
- Solutions are proven at a number of joint customer sites
- Pre-integrated with Misys BankFusion
- Strong set of market-leading, highly satisfied customers
“The market for digital banking is exploding. More than half a billion people already use mobile devices for personal banking and this is set to double in the next four years. This deal reinforces our digital banking proposition in this rapidly expanding area by adding world-class consumer-oriented solutions to our offering. It helps us continue to grow our business, following six straight quarters of revenue growth, and secure our leadership position in banking," commented Nadeem Syed, Misys CEO.
Misys stressed that “digital channels are a strategic play in the battle for the customer."
“Exponential increase in global internet and mobile phone users is changing the way in which customers want to interact with their banks. Digital is the primary channel for transactions at 91% of banks (EFMA)," it added.
Misys cited Ovum analysts as saying that banks will spend 6.8% more on digital banking this year than they did in 2013. Quoting Juniper Research it added that one 1 billion mobile phone users will have made use of their mobile devices for banking purposes by the end of 2017.
Two large deals in the sector in the past two months
Last December, NCR, the 129-year-old maker of cash registers and other payment-processing systems, agreed to acquire Digital Insight Corp. for USD 1.65 billion to gain software for online and mobile banking. The importance of the transaction is reflected by the fact that Digital Insight, founded in California in 1995, develops mobile, Internet banking, and ATM software and comprehensive payment solutions for 1,700 (mostly U.S.-based) financial institutions.
There was a sizeable deal on this market in Turkey this year. In early February, Monitise plc acquired Pozitron Yazilim A.S., a privately-owned mobile technology company based in Turkey, delivering mobile banking, payments and commerce solutions to businesses in its home market, the Middle East and internationally. Monitise paid GBP 60 m for one of the main suppliers of Turkish banks. The share price of the buyer jumped 2% on the announcement. 60% of the purchase price depends on the future performance of Pozitron.
