Equifax To Acquire eThority

Consumer and commercial information solutions provider, Equifax Inc. (EFX - Analyst Report) recently announced that it has struck a deal to acquire workplace and other analytical software provider eThority. The company manufactures easy-to-use data interaction and reporting solutions to business enterprises of all sizes. Although the deal has been finalized, the company did not provide information regarding the financial impact.

By combining the workforce and other analytical software of eThority with the company’s unemployment, payroll/HR and I-9 data, Equifax expects to be able to offer a more comprehensive solution to its end customers. The combined product will help them cater to organizations of all sizes, and will also help them in retaining, growing and planning for the right workforce.  The new product will also help in benchmarking different companies against the industry.  

Acquisitions remain an area of management focus, as the company continues to round out its portfolio. Recently, Equifax completed the acquisition of Costa Rica-based credit reporting company, Datum. The company did not disclose the financial terms of the deal.

Equifax already has a customer service and technology service center in Costa Rica that employs more than 500 people. This apart, Equifax also bought DataVision Resources, which provides data and business services to the mortgage, insurance and financial services industries, during the first week of August this year. We believe that Datum is a natural choice for Equifax as it will help the company expand its geographical footprint, and enhance its position in the rapidly growing Costa Rican market.

These acquisitions are a part of the company’s expansion strategy in its four targeted geographical regions — India, Russia, China and America. It is also expanding core operations in Russia and building resources in India. This has resulted in a 12.0% growth in the International segment during the second quarter. We expect these strategic acquisitions to generate growth for the company over the long term.

Apart from acquisitions, the company has also completed some divestitures with the intention of streamlining its operations. The company was in the news for selling all the assets of its Direct Marketing Services division to Alliance Data Systems for $117.0 million.

The company expects to use the proceeds to expand its business and meet other general corporate obligations. With the sale of its direct marketing division, Equifax would be able to focus better on its main business.

The company has delivered modest second quarter results, just matching the Zacks Consensus Estimate on the bottom line. Though the guidance for the third quarter was positive, it was not enough to drive the shares.

However, management’s focus on product innovation, broadening data assets through acquisitions and continuous share gains in North America were encouraging. We believe that Equifax is well positioned to benefit from its leadership in important markets and strength in international markets.

A recent acquisition is expected to solidify Equifax’s presence in Brazil, augmenting international revenues. However, given its strong correlation to consumer and financial markets, as well as its U.S. exposure, improvement in results is likely to be gradual, in line with the country’s economic recovery. Current weakness in the mortgage sector could however rationalize Equifax’s growth.

Currently, Equifax has a Zacks #3 Rank, implying a short-term Hold rating.

Read the full analyst report on EFX