Jack Henry executes buying spree

The company, which provides integrated computer hardware and software solutions for financial institutions, thrift banks and credit unions, has undertaken numerous mergers and acquisitions this year.

“We’ve been quite busy. Typically, we perform one or two acquisitions a year – two if it’s a big year – and we’ve actually performed seven acquisitions or mergers this year,” said Tony Wormington, Jack Henry president. The company had revenues of $467.4 million as of June 30, the end of its fiscal year. It has 2,400 core customers within the banking industry, he said.

Verinex

Jack Henry’s latest deal was the Oct. 1 purchase of California-based Verinex Technologies Inc., a 7-year-old firm that has developed and marketed biometric security solutions.

“This system is all about identification and authentication, as well as improving security. It is about metrics solutions. It allows for fingerprint recognition technology,” Wormington said.

The deal was “beneficial to Jack Henry, and the price was good” for Verinex, said Scott Almquist, manager of business development for Verinex. Neither Almquist nor Wormington would disclose the price tag of the deal.

“The financial industry is what we believe is the sweet spot for the use of biometrics,” Almquist said, adding that Verinex predominantly operates in the health care sector.

Making an inroad into the financial industry has been a challenge due to the high number traditional suppliers already in place, he added.

Verinex’s technology allows for “single sign-on capability” where the user is identified in the bank’s system and software applications connected to that person’s position could be launched as soon as they arrive at work, Wormington said. It can also reduce the need for employees to utilize several passwords, or to need to change them frequently, he added.

While the need for passwords can be lessened with fingerprint recognition, the ultimate security of the person’s identity is maintained through features in the technology, Almquist said.

“Privacy of the user template is secured in the sense that we don’t actually store the fingerprint image itself,” Almquist said.

“What we do is we take the image, we map minutiae points and we store it as binary encrypted data so (neither) we nor the company nor any other third party could reverse engineer the template into an actual fingerprint image,” he added.

Verinex has also worked in the areas of iris, retina, facial, voice and signature identification.

For Jack Henry, Wormington sees Verinex as a definite supplement to the company’s bottom line. “I think that we’ll certainly need to add additional staff based on the expected business we should derive by having this available for our numerous customers,” he said.

Other 2004 buys

Among the company’s other 2004 purchases are companies that provide specialized services to Jack Henry’s core clients in the financial industry. On Sept. 8, Jack Henry acquired Texas-based Select Payment Processing, an electronic check-processing firm that handles accounts for financial institutions and government entities, Wormington said.

“Our goal is to make this solution available to our core customers … throughout the U.S. (and) to their commercial staff who can then make it available to their corporate clients,” Wormington said, “which would derive fee income for our financial institutions and ourselves, as well.”

Also Sept. 8, Jack Henry announced the purchase of Massachusetts-based Banc Insurance Services, a “provider of turnkey insurance agency solutions for financial institutions,” according to a Jack Henry news release.

Typically, Wormington said, financial institutions have either bought an insurance agency to bring on board and operate under its name or hired agents and launched a new agency altogether.

Through BIS, “we can run an agency for the financial institution and bring to the table discounts and premiums that are advantageous based on our aggregated volume,” he said.

This allows Jack Henry access to the largest insurance carriers “and to get the best commissions on the premiums being paid,” Wormington added.

Another firm added to Jack Henry’s subsidiary list is Alabama-based Yellow Hammer Software Inc., which provides anti-fraud and anti-money laundering solutions, Wormington said. That deal was closed in February, he added.

Maine-based E-ClassicSystems Inc. a developer of software to manage the operation and accounting of ATMs, was purchased in April, Wormington said, and Texas-based Alex eSolutions Inc. was bought in June. The latter firm develops products that assist banks in providing information to fulfill their regulatory reporting requirements, he added.

Widespread operations

Acquiring businesses in disparate locations and consolidating them under the Jack Henry umbrella is the norm for the almost 30-year-old company that went public in 1985.

“The majority of our locations have data centers set up, and we process financial institutions in an outsourcing environment,” Wormington said.

The company employs around 1,000 at its Monett headquarters and more than 2,500 in offices throughout the United States, Wormington said.

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