Consumer, commercial and workforce information solutions provider, Equifax Inc. (EFX) recently announced the acquisition of TDX Group, a UK-based debt-management firm, for a purchase consideration of $327 million.
Founded in 2004, TDX Group provides businesses with technology, data and advisory solutions to improve debt liquidation and ensures fair management of debt collections and recoveries.
Leveraging TDX's technology, software, services and platforms, Equifax will be able to expand its debt-collection capabilities. The acquisition of TDX Group will enable Equifax to provide the broadest possible insight into consumer performance, financial status, capabilities of customers and market opportunities. Moreover, it will further solidify Equifax’ presence in the UK, which in turn will boost its revenues, going forward.
Today customers look for solutions that streamline their collection capabilities. We believe the addition of TDX’s services will help Equifax to provide better data, technology and advisory solutions and position it as a leader in important markets.
Equifax had cash balance of $131.9 billion at the end of the third quarter of fiscal 2013 compared with $104.9 billion in the previous quarter. The company generated $374.4 million cash from operating activities in the first nine months of fiscal 2013. Therefore, considering its cash balance Equifax will have no problem buying the company.
Apart from this, Equifax has been entering into partnerships to expand its product portfolio, which will boost its market share. We believe that Equifax’s strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America are encouraging.
Given the company’s strong correlation with the consumer and financial markets as well as its U.S. and European exposure, we see a gradual improvement in results. Competition from Fiserv Inc. (FISV) and Automatic Data Processing, Inc. (ADP) is however a concern.
Currently, Equifax has a Zacks Rank #2 (Buy). Investors interested in the technology sector can also consider Western Digital Corp. (WDC), which carries a Zacks Rank #1 (Strong Buy).
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