Fidelity (FIS) is likely to sell its business on the capital markets

National Fidelity Information Services FIS is reportedly in talks with Symphony Technology Group to sell its business in the capital markets. According to people familiar with the matter, the deal could be valued at nearly $ 2 billion.

According to a person knowledgeable on the matter, technology-driven private equity firm Symphony could announce the purchase of the assets as early as next week. Assets will likely include Fidelity’s cash management, alternative trading, and algorithm-based trading platforms.

Founded in 2002, Symphony invests in data analytics, software and software-based technology services companies.

Fidelity, based in Jacksonville, Florida, provides banking and payment technology solutions, processing and information-based services to the financial services industry. Fidelity prioritizes long-term growth through its continued investments in technology and innovation in high growth markets to expand its total addressable market.

Given that the deal is valued at around $ 2 billion, the sale is likely to bolster Fidelity’s liquidity profile, giving it opportunities to focus on its core businesses. In fact, as of September 30, 2021, Fidelity had total debt of $ 19.8 billion.

The level of debt has been volatile in recent quarters. Its cash and cash equivalents of $ 1.4 billion as of the same date have increased by approximately $ 2 billion since the end of 2020. The deal is also expected to allow Fidelity to reduce its exposure to rate volatility. exchange rate with respect to its activities in the capital markets.

The capital market business, which focuses on serving global financial services clients with a wide range of buy and sell solutions, generates significant recurring revenue for Fidelity. For the quarter ended September 30, recurring revenues from its capital markets were primarily driven by strong sales, boosting outsourced solutions and services.

Additionally, the segment’s Adjusted EBITDA margin increased primarily due to a combination of higher margin revenues and continued cost management by Fidelity. Thus, the sale of the segment could induce a loss of income and have an unfavorable impact on Fidelity’s financial results in the short term.

Fidelity shares have lost 26.3% in the past six months compared to the 24.2% drop in its industry.

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Currently, the action carries a Zacks Rank # 3 (Hold). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Other companies drive inorganic growth

Several companies in the financial sector are making consolidation efforts to counter the low interest rate environment and rising costs of investing in technology.

Recently, Citizens Financial Group, Inc. CFG completed its previously announced merger with JMP Group LLC. Citizens Financial announced the cash deal in September to expand its capabilities in the capital market.

The buyout is expected to foster growth, diversify Citizens Financial’s capital market platform and provide greater scale in key verticals of healthcare, technology, finance and real estate.

Likewise, last month, in order to further diversify its deposit-taking capacities and the composition of its income, Raymond James RJF announced a cash-cum-stock agreement to acquire TriState Capital Holdings, Inc. TSC for $ 1.1 billion.

The transaction is still subject to the approvals of the regulators and shareholders of TriState Capital. Paul Reilly, President and CEO of Raymond James, said: “It is important to note that this acquisition further illustrates our commitment to utilize excess capital through organic and inorganic growth which we believe will generate strong returns for long-term shareholders. “

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Fidelity National Information Services, Inc. (FIS): Free Stock Analysis Report

Raymond James Financial, Inc. (RJF): Free Stock Analysis Report

Citizens Financial Group, Inc. (CFG): Free Stock Analysis Report

TriState Capital Holdings, Inc. (TSC): Free Stock Analysis Report

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