Sopra Steria is to acquire fellow French core banking vendor SAB as part of a strategy to turn around its underperforming Banking Software division.
Under the proposed transaction, Sopra Banking Software would initially acquire a majority stake in SAB and the remaining share capital in a year’s time.
Founded in 1989, SAB has over two hundred references, mostly retail banks. The company generated revenue of €64.4 million in 2018. SAB boasts significant recurring revenue streams: maintenance services and ASP services accounted for 30% and 12% respectively of its 2018 revenue.
The acquisition will strengthen Sopra Banking Software’s position in France in core banking software – from where SAB generates two-thirds of its revenues from mid-market clients – and expand its reach in Europe and in Africa.
The deal will also extend Sopra Banking Software’s ability to provide core banking services in ASP mode, which is becoming more popular among banks looking for easy-to-install, on-demand solutions that don’t require a big capital outlay.
SAB co-founders Olivier Peccoux and Henri Assaf, will remain in their current roles to support and guide teams through the transition period and beyond.
Sopra Sterai was forced to issue a profit warning in 2018 following the loss of a major commercial opportunity and a slippage in installation timeframes within the Banking Software unit. As a result, the operating margin on business activity of Sopra Banking Software was €42m below the previous forecast: around €27m regarding licences and €15m regarding project margin.
Éric Pasquier, CEO of Sopra Banking Software believes the deal with SAB will help the business to return to operating profit margins in line with historic performance levels from 2020 onwards.