We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Fidelity (FIS) Likely to Sell Its Capital-Markets Business
Read MoreHide Full Article
Fidelity National Information Services (FIS - Free Report) is reportedly in talks with Symphony Technology Group to vend its capital-markets business. According to people familiar with the matter, the deal could be valued at nearly $2 billion.
Per a person knowledgeable about the matter, the technology-centered private equity firm Symphony may announce the purchase of the assets as soon as next week. The assets will likely include Fidelity’s treasury management, alternative-trading and algorithm-based trading platforms.
Founded in 2002, Symphony invests in data analytics, software and software-enabled technology services companies.
Jacksonville, FL-based Fidelity provides banking and payments technology solutions, processing services and information-based services to the financial services industry. Fidelity prioritizes long-term growth via its ongoing investments in technology and innovation across the high-growth markets to expand its total addressable market.
Given that the deal is being valued at around $2 billion, the sale is likely to boost Fidelity’s liquidity profile, offering it opportunities to focus on its core operations. In fact, as of Sep 30, 2021, Fidelity had total debt of $19.8 billion.
The debt level has been volatile over the past few quarters. Its cash and cash equivalents of $1.4 billion as of the same date have declined from around $2 billion since the end of 2020. The deal is also likely to enable Fidelity to reduce its foreign exchange volatility exposure with respect to its capital-markets business.
The capital market business, which is focused on serving global financial services clients with a broad spectrum of buy- and sell-side solutions, generates significant recurring revenues for Fidelity. For the three months ended Sep 30, its capital markets’ recurring revenues were majorly driven by sound sales, boosting outsourced solutions and services.
Moreover, the segment’s adjusted EBITDA margin rose primarily on higher-margin revenue mix and continued cost management by Fidelity. Thus, sale of the segment might induce a loss of revenues and unfavorably impact Fidelity’s financials in the near term.
Shares of Fidelity have lost 26.3% over the past six months compared with the 24.2% fall of its industry.
Several companies from the finance sector are making consolidation efforts to counter the low-interest rate environment and higher costs of investments in technology.
Recently, Citizens Financial Group, Inc. (CFG - Free Report) completed its previously announced merger with JMP Group LLC. Citizens Financial announced the all-cash deal in September to augment its capital-market capabilities.
The buyout is expected to foster growth, diversify Citizens Financial's capital-market platform and provide a grander scale in the key verticals of healthcare, technology, financials and real estate.
Similarly, last month, in order to further diversify its deposit-gathering capabilities and revenue mix, Raymond James (RJF - Free Report) announced a cash-cum-stock deal to acquire TriState Capital Holdings, Inc. for $1.1 billion.
The transaction is still subject to approvals from the regulators and TriState Capital shareholders. Paul Reilly, chairman and CEO, Raymond James, said, “Importantly, this acquisition further illustrates our commitment to utilize excess capital through organic and inorganic growth that we expect to drive strong returns for shareholders over the long term.”
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Fidelity (FIS) Likely to Sell Its Capital-Markets Business
Fidelity National Information Services (FIS - Free Report) is reportedly in talks with Symphony Technology Group to vend its capital-markets business. According to people familiar with the matter, the deal could be valued at nearly $2 billion.
Per a person knowledgeable about the matter, the technology-centered private equity firm Symphony may announce the purchase of the assets as soon as next week. The assets will likely include Fidelity’s treasury management, alternative-trading and algorithm-based trading platforms.
Founded in 2002, Symphony invests in data analytics, software and software-enabled technology services companies.
Jacksonville, FL-based Fidelity provides banking and payments technology solutions, processing services and information-based services to the financial services industry. Fidelity prioritizes long-term growth via its ongoing investments in technology and innovation across the high-growth markets to expand its total addressable market.
Given that the deal is being valued at around $2 billion, the sale is likely to boost Fidelity’s liquidity profile, offering it opportunities to focus on its core operations. In fact, as of Sep 30, 2021, Fidelity had total debt of $19.8 billion.
The debt level has been volatile over the past few quarters. Its cash and cash equivalents of $1.4 billion as of the same date have declined from around $2 billion since the end of 2020. The deal is also likely to enable Fidelity to reduce its foreign exchange volatility exposure with respect to its capital-markets business.
The capital market business, which is focused on serving global financial services clients with a broad spectrum of buy- and sell-side solutions, generates significant recurring revenues for Fidelity. For the three months ended Sep 30, its capital markets’ recurring revenues were majorly driven by sound sales, boosting outsourced solutions and services.
Moreover, the segment’s adjusted EBITDA margin rose primarily on higher-margin revenue mix and continued cost management by Fidelity. Thus, sale of the segment might induce a loss of revenues and unfavorably impact Fidelity’s financials in the near term.
Shares of Fidelity have lost 26.3% over the past six months compared with the 24.2% fall of its industry.
Image Source: Zacks Investment Research
Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Firms Boosting Inorganic Growth
Several companies from the finance sector are making consolidation efforts to counter the low-interest rate environment and higher costs of investments in technology.
Recently, Citizens Financial Group, Inc. (CFG - Free Report) completed its previously announced merger with JMP Group LLC. Citizens Financial announced the all-cash deal in September to augment its capital-market capabilities.
The buyout is expected to foster growth, diversify Citizens Financial's capital-market platform and provide a grander scale in the key verticals of healthcare, technology, financials and real estate.
Similarly, last month, in order to further diversify its deposit-gathering capabilities and revenue mix, Raymond James (RJF - Free Report) announced a cash-cum-stock deal to acquire TriState Capital Holdings, Inc. for $1.1 billion.
The transaction is still subject to approvals from the regulators and TriState Capital shareholders. Paul Reilly, chairman and CEO, Raymond James, said, “Importantly, this acquisition further illustrates our commitment to utilize excess capital through organic and inorganic growth that we expect to drive strong returns for shareholders over the long term.”