It was just at the end of the Q3, 2017 that Fiserv acquired the Elan assets from US Bank. And now, roughly 90 days later, the First Data acquisition.
Our Fiserv insiders tell us that individuals in their Payments area(s) are nervous. In recent years, Fiserv has become notorious for “efficiency” related staff reductions. These have often come to benefit of the shareholders but the detriment of their support organization.
When words like “The merger is expected to generate $900M in run rate cost savings”, are included in the press release, it may be time for individuals in the three Cards areas in the new Fiserv/Elan/First Data organization to start polishing up their resumes.
There is no doubt that Fiserv will eventually merge these organizations together, and come out with a larger client footprint. in the interim, clients can expect 12-18 months of disruption as the management team tries to determine which employees stay and which are part of the $900M in cost savings. Will they all be from the Payments Divisions?
Think about the numbers. Let’s say that most of those cost savings are employee related. If the average Fiserv employee makes $80k per year, it would take a reduction of 10,000 employees to reach $800M of the $900M they intend to save each year in run rate cost savings.
Now, let’s consider the debt. The $17 billion dollar debt load that Fiserv will take on as part of this acquisition will have to effect future product development, or support, at least in the short term.
The old adage is that a company’s senior management team is responsible for three primary stakeholders: customers, employees and shareholders. This acquisition seems like a move where 2/3 of those stakeholders may be taking a hit, and the jury is still out on whether the Fiserv stock price will increase as a result of this move. First Data is a lower margin business than Fiserv was, the company was bought at a premium, and includes a large debt burden.
It will be interesting to see what happens.