Twin Acquisitions by DST Systems

DST Systems Inc. ( DST - Analyst Report ) recently made two acquisitions, although the financial terms of neither were disclosed.

DST Systems acquired Newkirk Products Inc., a communication solution provider to financial services and health care verticals. Newkirk delivers marketing communications solutions in printed, digital and interactive forms. These communication solutions are based on extensive market study, client-interaction as well as feedback from different related areas.

The information thus gathered throws light on a company’s operations and market position, which is then passed on to the general public, with the intention of converting them into prospective customers. Apart from communication information, Newkirk delivers education and investment information.

DST Systems will integrate the new business into its Output Solutions Segment, but will retain Newkirk’s brand identity. The newly added intellectual assets complement the services offered through the segment, lowering integration time.

DST Systems’ Output Solutions segment provides single source, integrated print and electronic statement and billing output solutions. It also provides customized statement and bill production, marketing and personalization services, postal optimization, and electronic presentment, payment and distribution solutions.

Newkirk’s solution will also provide Retirement Solutions clients access to communication and education materials, financial planning tools and plan documents.

The other recent acquisition was of the assets of the financial services consulting firm, Finix Business Strategies LLC. The entire transaction will be carried out through a wholly owned subsidiary of DST Systems.

The combination of the Finix assets and DST System’s years of experience in the financial services vertical will give shape to a new operating unit, DST Brokerage Solutions. The unit will deliver an extended suite of services targeting brokers and dealers. The solution will facilitate fully integrated, seamless communications 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 the back-to-back acquisitions will soon be accretive to DST Systems’ earnings as the complementary businesses will cut integration time and costs.

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 increasing popularity of mutual funds.

On the other hand, tough competition from Advent Software Inc. ( ADVS - Snapshot Report ) and a high debt burden remain concerns.

Currently, DST Systems has a Zacks #3 Rank, implying a short-term Hold recommendation.