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BISYS is uniquely positioned to support the financial services industry's increasing consolidation, product expansion, technology utilization, and trend toward outsourcing as our clients respond to increasing consumer demands, changing market dynamics, and new forms of competition.
The BISYS Group, Inc. provides outsourcing, back-office, and third-party services to the financial services industry. The company's business is divided between three units: Investment Services, addressing the needs of investment firms of all sizes; Insurance Services, providing life insurance and commercial insurance services; and Information Services, providing banking solutions to midsized and community banks, corporations, and healthcare companies. BISYS is a public company based in New York City and listed on the New York Stock Exchange.
Separating from ADP in the Late 1980s
BISYS grew out of Automatic Data Processing, Inc. (ADP), a pioneer in the field of outsourced payroll accounting. ADP was founded in the late 1940s by young accountant Henry Taub as Automatic Payrolls, Inc. At the time, small businesses were finding it increasingly difficult to comply with mounting government regulations brought on by the creation of Social Security in the 1930s and the system of income tax withholding introduced during World War II. Taub found a ready market for his innovative service and soon was joined by his younger brother Joe and a World War II veteran and Columbia graduate in economics named Frank R. Lautenberg, who would become better known as a U.S. Senator from New Jersey. The three men worked well together and expanded the company's offerings, primarily through acquisitions, transforming Automatic Payroll into Automatic Data Processing, Inc., a multibillion-dollar information services company. One of the acquisitions was United Data Processing, Inc., established in 1966 to provide processing services to banks and thrifts. In the 1980s ADP suffered some setbacks, prompting management to either sell off or downsize some of its product lines to focus on major revenue centers. In the wake of the Savings and Loan debacle of the 1980s, which resulted in a number of institutions closing their doors and a smaller client base for data processors dedicated to this sector, ADP's banking and thrift data processing operations were deemed expendable. In August 1989 a group of ADP executives incorporated BISYS Group, Inc. and with the financial backing of Welsh Carson Anderson & Stowe paid $78 million to acquire the banking and thrift data processing business.
Heading BISYS as chief executive officer and chairman of the board was Lynn J. Magnum, a 22-year ADP veteran who had served as division president for the Employer Services National Accounts Division prior to the formation of BISYS. Not one of the larger players in the field, BISYS in the beginning eschewed large banks as clients in favor of smaller institutions: community banks with less than $2 billion in assets and thrifts with less than $10 billion in assets. The company also adopted a "single product, single source" strategy, an outgrowth of management's experience at ADP, which in the early 1980s had attempted to run several different accounting systems for clients, only to find that such a broad approach proved difficult and expensive to run.
Learning from their mistakes at ADP, management now looked for an integrated set of software applications that would not only provide the flexibility to allow clients to grow but to support BISYS's own expansion plans. The result was a product called TotalPlus, a complete end-to-end solution that could be tailored to meet the needs of banks and thrifts of all sizes. Accessible on desktop computers, the system could produce all customer documents; handle all loan functions through Total Loan Manager; process checks; do research, create reports, and handle customer service requests through Total Report Manager; and help make marketing and financial decisions through the information compiled from Total Marketing Manager and Total Financial Manager. In addition, BISYS helped clients to design their computer networks to optimize connectivity internally or between the client and BISYS's hosted functions. The package of data processing services BISYS had to offer came at a lower cost per transaction than a bank or a thrift could hope to achieve through an in-house system.
Going Public in the Early 1990s
BISYS wasted little time in building on its base of operations through complementary acquisitions. In October 1989 it added Data Systems Corp., picking up a company that provided data processing services to the southeast Atlantic Coast area. A pair of acquisitions followed in 1991: Litton Mortgaging Servicing Center, which acted as a sub-servicer for mortgage and commercial real estate loans, and certain assets of JRS Inc., an item processing and vault servicing company. Early in 1992 BISYS acquired Tridatatron Software Services, Inc., a company that specialized in data processing for mortgage loans. Later in 1992 BISYS went public, netting approximately $50 million in an initial offering of stock, with the money earmarked to pay off the debt taken on in the 1989 buyout as well as to fund further acquisitions. At this stage, the company's stock traded on the NASDAQ. A secondary offering in February 1993 raised an additional $40 million.
At the time it went public BISYS serviced 214 thrifts, 39 commercial banks, and a handful of mortgage banks in 31 states. The company lost a few thrifts as clients in the early part of the decade when some of the institutions failed and were taken over by regulators. BISYS began to focus on increasing its slate of banking system clients and in 1993 looked to broaden its product offerings even further through acquisitions. In February of that year it spent $10 million in cash to acquire The Barclay Group, Inc., a Pennsylvania company that specialized in providing record-keeping and other support services for 401(k) plans, a service that BISYS could now offer to its small bank customers. As a result of the acquisition, BISYS became the country's largest third-party administrator of corporate-sponsored small to medium-sized 401(k) plans. Later in 1993 BISYS added another attractive service for banks, paying $60 million for Columbus, Ohio-based Winsbury Companies, a creator, marketer, and administrator of proprietary mutual funds for banks. Also of note in 1993, BISYS acquired Data Management Systems, Inc., a deal that added 30 banking customers in New England, and Meyer Interest Rate Survey of Calabasas, California, a company that tracked deposits and loan information for more than 3,000 banks, thrifts, and credit unions.
BISYS achieved some internal growth in 1994, as it beefed up its home banking services by creating a new position, vice-president of electronic banking. Before the year was out the company introduced automatic teller machines and card management platforms, and in 1995 added point-of-sale services, home banking, and bill paying services. The thrust of the initiative was to provide the company's bread-and-butter small bank customers with the electronic capabilities they would need to compete against larger banks in a time of rapidly changing technologies and consumer demands. BISYS also continued to add banking customers through external means as well during 1994. The acquisition of Sun Trust Data Systems, Inc. brought with it 100 community bank customers in Alabama, Florida, Georgia, and Tennessee, significantly adding to the company's customer base in the Southeast.
BISYS added to its bank fund business in 1995 and complemented its Winsbury operation with the acquisition of Concord Holding Corporation in a stock swap valued at $120 million. Concord expanded BISYS's reach to include money center banks, as well as increased its overall stake in the fund services industry and established an offshore platform for fund services in Ireland. Also in 1995 BISYS used $38 million in stock to acquire Birmingham, Alabama-based Document Solutions, Inc., a check and document imaging software firm that was ideally suited for BISYS's core of community and mid-sized banks. As a result of expansion in the first half of the 1990s, the company's balance sheet grew at a similar pace. Revenues increased from $88.3 million in 1992 to more than $200 million in 1995.
Expansion on Many Fronts in the Late 1990s
In the second half of the 1990s BISYS evolved further into a multifaceted outsourcer, no longer limited to a single product and catering to a narrow market. The company raised its sights to include large banks as well as investment management and mutual fund companies, insurance companies, and consumer finance companies. The company also continued to grow through acquisitions. In 1996 BISYS added Strategic Solutions Group Inc., which provided automated telephone marketing systems to financial institutions. The purchase of The Underwriters' Group (TUG) in June 1996 allowed BISYS to sell insurance through banks. Harrisburg, Pennsylvania-based TUG was a major wholesaler of insurance products for agents, banks, and financial services companies and also provided back-office administration for insurance selling operations. The September 1997 acquisition of Benefits Services, Inc. enhanced BISYS's position as a single source outsourcer of insurance products and services, not only to insurance companies, but also to producer groups, securities firms, and financial institutions. Benefit Services was one of the country's leading providers of long-term care insurance products, a fast-growing segment of the insurance marketplace.
Starting in 1998 BISYS picked up the acquisition pace, bringing four significant companies into the fold: Underwriters Service Agency, bolstering the company's life insurance services; CoreLink Resources, improving BISYS's share of the fund service industry while adding sophisticated trade execution, settlement, and custody services; Potomac Group, supplementing the company's marketing sales support services for life insurance and estate planning; and Greenway Corporation, reinforcing the company's leading position in the check imaging field. BISYS closed out the decade with a bevy of acquisitions in 1999, including EXAMCO, Inc., which offered certification training and continuing education programs to the securities and insurance industries; Poage Insurance Services, a life insurance wholesaler that greatly expanded BISYS's presence on the West Coast; Bachmann Asset Management's mutual fund administration business; Dover International, which added regulator education services for the investment industry; and State Street Bank and Trust Company's Retained Asset Account Processing business, which laid the foundation for BISYS's Asset Retention Solutions unit. When BISYS closed the decade, revenues totaled $473 million and the company was enjoying net profits in the $40 million range.
BISYS was well positioned for the new century, as the ongoing convergence of the financial services industry, globalization, the increasing use of the Internet, and the growing reliance on outsourcing all played into the company's strengths. BISYS continued to seek out strategic acquisitions, in particular to build on its Insurance and Education Services unit, the fastest-growing part of its business. In 2000 BISYS acquired Pictorial, a leading provider of pre-licensing and continuing education training programs in all 50 states for insurance carriers, agencies, and agents. BISYS also acquired Salt Lake City-based Ascensus Insurance Services, a broker of life and health insurance products that BISYS had been pursuing for four years. Ascensus, which provided insurance products to more than 50,000 agents representing some 100 life insurance companies from 13 offices across the country, added a great deal of business while also expanding BISYS's geographic reach. For fiscal 2000 revenues soared to more than $570 million and net income almost doubled to $70 million. The company also initiated a two-for-one stock split.
BISYS continued to fill out its business in 2001, completing seven complementary acquisitions to take advantage of convergence in the financial services industry and increased reliance on outsourcing. The company continued to devote a great deal of attention to growing the insurance and education business, with a particular emphasis on filling in geographic gaps. The acquisition of Insurance Exchange of America, Inc. increased BISYS's presence in the tri-state region of New York, New Jersey, and Connecticut; Toner Organization added customers in the mid-Atlantic region; and Life Brokerage Corporation bolstered the company's presence in the Florida market. Despite a softening economy, which was dealt a further blow by the September 11 terrorist attacks, BISYS continued to experience a rapid climb in revenues, which topped $700 million for the fiscal year, yielding profits of more than $85 million.
In 2002 BISYS gained a coveted listing on the New York Stock Exchange. The company continued to prosper, completing another half-dozen acquisitions, and despite sluggish sales in the insurance and education services unit the balance sheet remained strong. In 2002 revenues increased to $865.7 million and net income improved to $115.9 million, and for the second time in just 16 months management engineered a two-for-one stock split.
Fiscal 2003 proved to be more of a challenging year for BISYS due to some declining markets, yet the company continued to expand on a number of fronts, adding customers in all divisions and expanding geographically through acquisitions. Revenues grew to $958.4 million and a year later topped the $1 billion mark, although net income tailed off to $111.8 million in 2003 and $63.6 million in 2004. The company had to cope with a number of challenges in 2004 when earnings fell short in several key business segments. In February the company's CEO, Dennis R. Sheehan, was forced to step down due to medical problems caused by an accident. His successor, Russell P. Fradin, had to contend with a struggling insurance and education services unit. Not only were sales off, the company soon announced that it would have to restate its earnings for the previous three years. Fradin maintained that the problem was limited to the life insurance operations and the way commissions receivable were accounted.
BISYS adjusted its business mix somewhat in 2005, selling off its Education Services unit to Kaplan Professional. Nevertheless, BISYS remained well positioned to continue its steady growth for the foreseeable future.
Principal Subsidiaries: Ascensus Insurance Services, Inc.;
BISYS Commercial Insurance Services, Inc.; BISYS Document Solutions LLC; BISYS Financial Services Ltd.; BISYS Fund Services, L.P.; BISYS Information Solutions L.P.; BISYS Insurance Services, Inc.; BISYS Retirement Services, Inc.
Principal Competitors: Electronic Data Systems Corporation; SEI Investments Company; State Street Corporation.