An investor with a flair for tech could take Fiserv to the next level


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Company: Fiserv Inc. (FISV)

Business: Fiserv provides payment technology and financial services worldwide. The company operates through the Acceptance, Fintech and Payments segments. The Acceptance segment provides point-of-sale and digital commerce merchant acquisition services; mobile payment services; security and fraud protection products; Carat, an omnichannel commerce solution; and Clover POS, a cloud-based point of sale solution. This segment distributes through various channels including direct sales teams, strategic partnerships with agent sales forces, independent software vendors, financial institutions and other strategic partners. The FinTech segment offers deposit and loan accounts to clients, as well as the management of an institution’s general ledger and central information files. This segment also provides digital banking, financial and risk management, treasury management, professional services and advice, item processing and source capture, and other products and services. The Payments segment offers card transactions, such as debit, credit and prepaid card processing and services; security and fraud protection products; card making; printing services; and various network services, as well as cardless digital payment software and services, including bill payment, account-to-account transfers, person-to-person payments, and electronic billing products. It serves businesses, banks, credit unions, other financial institutions, merchants and corporate clients.

Stock market value: $ 78.1 billion ($ 117.94 per share)

Activist: ValueAct Capital

Percentage of ownership: 1.60%

Average cost: n / A

Activist comment: ValueAct has been a leading governance-focused investor for 20 years and, since 2017, has been led by Mason Morfit as Chief Investment Officer. ValueAct has broadened the activists’ playbook under Morfit a bit, but it continues to be a leading investor focused on governance with its partners on boards of about half of the core portfolio positions. of the society.

What is happening?

ValueAct Capital took a position of $ 1.2 billion (1.60%) in Fiserv Inc. (FISV).

In the wings:

This investment in Fiserv comes just in the right place of ValueAct – a technology company with good management, products and relationships that are somewhat misunderstood by the market. Some of ValueAct’s most profitable investments have been made in other misunderstood technology companies like Microsoft, Seagate, and Adobe. For example, Microsoft and Seagate were both considered PC companies when they were actually cloud companies. The market now sees Fiserv as a legacy old tech company, when in reality it is a new world company.

Even as a legacy tech company, Fiserv is a good company, growing at around 8% per year. But Fiserv transforms long before it is disrupted by smaller competitors, and it has the connections to evolve its technology with its deeply integrated customers. Clover, the company’s intelligent point of sale terminal, is a perfect example. Clover came out a few years after Square, but Clover’s business is already bigger with the amount of payments it processes and growing faster than Square. Clover could be valued today at between $ 30 billion and $ 45 billion, including debt, and could be worth $ 185 billion by 2024.

But Clover is just an opportunity to transform. The key here is for management to embrace this transformation strategy and could find other organic and strategic opportunities to move it forward. If the company is fully engaged in its evolution, it should be able to achieve an annual growth rate of at least 15%. This transformation can increase the lifetime value of its products to the company by 60%.

To get there, the business needs to focus on three main areas. First, invest to increase this rate of growth. Second, grow by acquiring and integrating a few other companies like Clover. And third, by simplifying its strategy and its way of communicating with the market. The market needs to better understand the business and its opportunities.

Right now, the FISV is trading at a discount to the average S&P 500 company, although its growth rate is higher than the average S&P 500 company, without crediting the additional growth of Clover. ValueAct can be very helpful in helping management achieve this transformation, just as they have at Microsoft, Adobe and Seagate. As history has shown, they will be at least one committed and supportive shareholder and, where appropriate, will bring value as a director to create shareholder value. They will certainly continue to engage with the company on a supportive basis as they get to know each other better and if they end up taking a seat on the board, it will likely be amicable to support The direction.

Ken Squire is the founder and chairman of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of 13D Activist Fund, a mutual fund that invests in a portfolio of 13D activist investments. .

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