Digiliti Money may be able to breathe a much-needed sigh of relief after a tumultuous few weeks, including declining revenues, appointing an interim CEO and the Aug. 14 delay of its Q2 earnings report.
The Minneapolis-based company, which sells mobile financial services app technology, has an offer on the table from Urban FT, a New York-based digital banking platform provider that wants to buy the company in an all-cash offer.
“We are looking to grow organically by expanding our base of users on our existing platform, which we think is exceptional, but we also want to grow acquisitively,” says CEO Richard Steggall.
Digiliti Money, which made a name for itself in the remote deposit capture space, is an attractive acquisition target for Urban FT because of is its “exceptional” client and strategic relationships, Steggall adds.
The two companies have similar targets—financial institutions or program managers that need better mobile apps to engage their customers. But Steggall believes that Urban FT would be able to reduce operating costs significantly and offer existing Digiliti Money clients additional services, such as Urban FT’s lifestyle app features.
“This is a tremendous opportunity for both companies,” he tells Paybefore. “They currently have a cost of revenues and cost of sales in the order of 65 percent, and we can bring that down to around 40 percent almost immediately by putting their clients on our platform.”
A big contributor to Digiliti Money’s expenses are data costs, according to Steggall, who says Urban FT can reduce them by authenticating checks on the mobile app as opposed to in a data center.
“Our goal in approaching Digiliti Money with an attractive and timely offer is to keep the business operating and viable as we consolidate the entities to leverage the savings from operational synergies,” adds Urban FT Chief Operating Officer Glen Fossella. “We believe that our cash offer—with the option for certain shareholders, at their discretion, to convert their Digiliti Money common stock to Urban FT common stock—represents the best benefit to all parties involved, most particularly the consumers who rely on the services of Digiliti Money’s clients.”
The deal, if accepted, will be financed through Urban FT’s largest investor. Although Steggall declined to name the investor for confidentiality reasons, he says the investor was one of the first employees of Oracle and financed Urban FT’s previous acquisitions of Wipit Inc. in 2015 and, more recently, iParse LLC, which closed last month within 90 days of first entering a terms sheet.
Urban FT won a 2017 Pay Award for Payments Technology Startup of the Year. It has 76 financial institution clients in addition to four nonbank clients, representing national brands in telecommunications, insurance and travel.
In April, the company announced a partnership with Sunrise Banks to offer clients a bank-issued prepaid card and accompanying mobile app.
Digiliti Money has until Aug. 21 to respond to the bid, which is subject to a financial audit as well as other due diligence and regulatory approvals.
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Image Credits: Andy Wright