It seems DST Systems Inc. (DST) is on a growth strategy through consecutive acquisitions. After making two acquisitions just last month, the company has now announced that it will take over a Canadian company, Subserveo Inc. The financial terms of the deal were not disclosed. Shares rose 8 cents in the after market trade.
Vancouver-based Subserveo provides automated software for broker dealers and investment advisers in the U.S. and Canada. Using its flagship compliance and surveillance softwares, companies are able to perform daily compliance supervision, manage risks and report efficiently.
DST Systems will integrate the new business into its Brokerage Solutions segment. The operating unit will be known as DST Subserveo in Canada. As per management, the newly added intellectual assets will complement and enhance the services offered through the segment.
With support from Subserveo, broker/dealers will be able to keep a track of daily trading and compliance activities automatically. But we expect integration to take time as the Broker Solutions segment is itself new.
In May, DST Systems acquired Newkirk Products Inc., a communication solution provider to financial services and health care verticals. While retaining Newkirk’s brand identity, DST Systems integrated the new unit into its Output Solutions segment.
Apart from strengthening the Output Solutions segment, Newkirk’s solution will also provide Retirement Solutions clients with access to communication and education materials, financial planning tools and plan documents.
The other recent acquisition was of the assets of Finix Business Strategies LLC, a financial services consulting firm. The entire transaction will be carried out through a wholly owned subsidiary of DST Systems.
The above mentioned “DST Brokerage Solutions” segment is a confluence of Finix assets and DST System’s rich experience in the financial services vertical. The unit was given shape to deliver an extended suite of services targeting brokers and dealers. The solution will facilitate fully integrated, seamless communication between fellow broker-dealer desktops, back offices and asset management platforms.
DST Systems is one of the leading global providers of sophisticated information processing software and products to the financial services industry, primarily mutual funds. The company has supplemented internal growth with strategic acquisitions. We believe that these back-to-back acquisitions will soon be accretive to DST Systems’ earnings.
The company performed well in its first quarter, surpassing the Zacks Consensus Estimates on both the top and bottom lines. We believe that DST Systems’ leadership and scale in Financial Services will attract new customers based on the growing popularity of mutual funds.
On the other hand, tough competition from Advent Software Inc. (ADVS) and a high debt burden remain concerns.
Currently, DST Systems has a Zacks #3 Rank, implying a short-term Hold recommendation.
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