Tuesday, September 30, 2014

SourceCorp, BancTec Merger Makes Sense

This week's announcement that SourceHOV has merged with BancTec made complete sense from a strategic standpoint-although the announcement admittedly caught us somewhat by surprise. Here's a true story: I was in Birmingham last week visiting ibml when the topic of BancTec came up. I said I could not figure out why they did not just merge with SourceHOV, especially since they had a common investor after BancTec was acquired by HandsOn3 in February.

BancTec's story was that HandsOn3 was only a minor investor in SourceHOV and that the plan was to integrate BancTec with the smaller Dataforce, which would create a $300M business combining BancTec's document capture outsourcing with Dataforce's call center business. Well, apparently, plans changed. It seemed that others agreed with my thoughts that it made just too much sense to merge BancTec and SourceHOV, which are in  a similar market and are both headquartered in Dallas.

SourceHOV, which is actually the result of the merger of the former Lason and SourceCorp that happened in 2011, must have been doing about $600M in annual revenue, as the new organization is being touted as having annual revenue of more than $900M. Here's a quote from the press release the discussion the complementary nature of the organization's services operations. " “SourceHOV’s deep domain expertise in healthcare and legal claims processing, alongside BancTec’s 40+ years of banking payment processing know-how, enables the creation of a global powerhouse provider for Transaction Processing Services,” said Ron Cogburn, Chief Executive Officer of SourceHOV and Mark Fairchild, President of BancTec in a joint statement.

As you might guess from the dual-attribution, decisions have not been announced as to who is going to be managing what going forward. Fairchild was only recently appointed president of BancTec in the wake of the acquisition by HandsOn3. Nothing will likely be finalized until the deal closes, which is apparently subject to Hart Scott Rudino review. DIR caught up with Ray Wise, VP Sourcing and Treasury at SourceHOV, who said he doesn't foresee any problems. The press releases states the closing is expected to happen this year. Wise said SourceHOV would like to close it sooner, but a lot depends on how long the government review takes.

HandsOn3 will become the owner of the entire organization, as it is buying out SourceHOV's other major shareholder. Related to the transaction, SourceHOV will receive a new $1.1B line of credit.

11 comments:

Anonymous said...

Hi,

Nice blog, are you in the know about the the valuation, at which Bantec was bought or Recent by of SourceHov shares by Handson3

Regards

Anonymous said...

Line of credit, and for such a huge amount, sounds questionable as to their longevity. I am an employee of one of their many Satelitte offices. Mergers just merge together in the end. Praying I have a job here for a bit longer. Wish they paid a decent wage especially given my background.

DIReditor said...

According to a VC site: HandsOn paid $95M for approximately a quarter of SourceHOV as a prelude to merging BancTec into the organization. According to an article this would value SourceHOV "at around $364 million," which seems a bit low considering that a Dec. 2013 article in the Times of India reported that SourceHOV was for sale and that "initial bids have valued SourceHOV at around $1 billion." Not sure why there is such a discrepancy.

DIReditor said...

I don't question their longevity because between the two organizations there is quite a portfolio of business to keep them going. Presumably the line of credit will be used to roll up more document process outsourcing providers.

Anonymous said...

Greed has taken over the world yet employees are treated like a mere resource. I made more money in the 99's doing the same job. They should become more concerned about maintaining valuable employees and have a concern for why so many leave. At the same time those that linger on are not productive. This company is micro managed period.

John S Martin said...

Very useful and nicely explained in simple terms. Thanks a lot.

Merger And Acquisition Process

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Anonymous said...

I vacated the Charlotte office earlier this year, and just as I predicted last year after the announcement of said merger from manager, the Charlotte office did indeed close their doors on June 3 2015. Funny though, the merger acquisition was already in the works 2 months prior. Another aspect of hidden communication. Had been in a similar situation years prior in another job. We live in a world of not knowing who we will be sending our mortgage from one month to the next, who is going to be controlling a bank, and the list goes on. In today's corporate America it's anyone s guess who signs an employee's paychecks. Never in my life did I have any idea the magnitude of private healthcare information being sent over to different countries..but it is what it is.....the buck keeps turning.

DIReditor said...

It seems to be that it should have been a forgone conclusion that BancTec would be merged with SourceCorp following the investment by HandsOn3 (now known as HGM), but the people I knew at BancTec denied it - maybe based on what they were being told. I don't think there was any question there would be consolidation after the acquisition was completed. Not sure how relevant a term "corporate America" is anymore, as HGM (and many other firms now involved in the transaction document processing space) seem like very global firms.