CheckFree Buys Corillian, Adding Online Banking To Its Portfolio

Implications: CheckFree Corp., an eCommerce, payments, and investment services processor, said on Wednesday that it will buy Corillian Corp. for $245 million. This is CheckFree's second acquisition in six weeks (for Carreker Corp.). Corillian adds an online banking software platform to its banking industry solution mix. The transaction values Corillian at a 49 percent premium over its Tuesday closing stock price.

Analysis: CheckFree's announced strategy for acquisitions is to stay within adjacent domains of its existing capabilities. This acquisition does just that by expanding CheckFree's solution footprint into the online banking solution mix, especially for the large bank marketplace. Corillian's big online banking clients include JP Morgan Chase, Wachovia, SunTrust, M & T Bank, and Commerce Bank. The keys to this deal for CheckFree are:

1. The deal further beefs up its Ecommerce business, adding potential synergies with its other software and billing/payment solutions. For example, during the fourth quarter, Corillian signed the first customer for its new end-to-end bill payment solution, which leverages the Corillian Payments Warehouse and the payment processing services of Corillian’s bill payment processing partners, which includes CheckFree.

2. Corillian had no realistic chance of hitting the $100 million revenue mark as an independent company. However, as part of CheckFree's Ecommerce group, the ability to expand and create new revenue synergies is more robust than as an independent company. CheckFree must move quickly to target and develop these opportunities.

3. The combination of CheckFree and Corillian should produce tighter integration of electronic banking, billing, payment and service support functionality, yielding a more efficient and complete end user experience. CheckFree must harvest cost reduction opportunities that will give it the flexibility to be responsive to future demands from its largest banking clients.