Virtual Financial Services Inc. (VIFI), has agreed to be acquired by Calabasas, CA-based Digital Insight. VIFI, a privately held Internet banking company based in Indianapolis, has about 150 customers using its Internet banking software. The majority of its customers are credit unions. As of Dec. 31, VIFI reported it had 425,000 active end-users.
Digital Insight will pay $51 million for VIFI $3.75 million in cash, $3.75 million in a one-year note, and the remaining $43.5 million in Digital Insight stock. That means Digital Insight is paying about $120 per active account, assuming that DIs stock stays where it is. Digital Insight is one of the few technology companies whose stock has been performing fairly well. It was selling at about $19 in mid-January, up from about $14 in November.
The acquisition will particularly strengthen Digital Insights position in the credit union market. John Dorman, CEO of Digital Insight, says roughly 40% of Digital Insights customers are credit unions, and the remaining 60% are banks (mostly regional and community). Were a much larger company than VIFI, says Dorman. But behind us, VIFI was the No. 2 provider of Internet banking software to credit unions.
Dorman said the deal is scheduled to close this first quarter, ending Digital Insights 18-month pursuit of VIFI.
Digital Insight currently plans to maintain VIFIs technology for VIFIs existing customers. As for the future, Dorman said it has not been determined if VIFI customers will eventually be using Digital Insights technology.
Jeanne Capachin, research director at Newton, MA-based Meridien Research, says Digital Insight is not buying VIFIs technology, but is buying their customers. She says the deal fits Digital Insights strategy in pursuing more business from credit unions and community banks, and that the deal makes a statement that Digital Insight intends to be a survivor.
