Talks On Purchase Of ADP's BISG American Express Short-Circuited

Talks between highly placed executives at American Express Co.'s Information Services Corp. and Automated Data Processing Inc. about acquiring part or all of ADP's Brokerage Information Services Group (BISG) broke off recently, industry sources say. The negotiations may also have included the creation of a joint venture.

There had been reports of such talks last year. But industry executives say the negotiations did not terminate until early this year.

Further negotiations, while not ruled out, are not currently being pursued, the sources say. Rick Duques, president of AmEx's Information Services and former president of BISG, and senior executives at ADP couldn't be reached for comment.

ADP had previously been reported in talks with Reuters Holdings PLC about a possible purchase or joint venture (IMD, Nov. 13, 1989). At the time, Reuters neither confirmed nor denied the talks. Robert Casale, the current president of BISG, then claimed ADP had "no desire to sell the business." But he added: "[as the company looks] at opportunities around the marketplace, we will explore a number of options."

BISG, which accounts for about 20 percent of ADP's revenues, provides quote terminal and back-office services to the financial industry. Its core quotation service is FS Partner, which has been rolled out at Merrill Lynch & Co. and AmEx's Shearson Lehman Brothers Inc. unit.

ADP's continued interest in shopping BISG around may stem from the ongoing weakness of the financial services industry. In the last quarter of 1990 (ADP's fiscal second quarter), BISG's revenue slipped 10 percent from a year earlier. But management said ADP's overall margin improved as a result of productivity enhancements and expense controls.

Industry sources say AmEx's recent interest in BISG was in keeping with the company's corporate profile. "It buys a lot of sorry companies and then takes a real long-term view of a return to profitability," says one industry analyst. "And American Express likes repetitive data-processing services."

"In the scope of things, a deal the size of [BISG] would not have been a huge acquisition [for AmEx]," says Prudential-Bache's securities analyst Larry Eckenfelder. Eckenfelder says AmEx's Information Services group has made small acquisitions in the past. ADP's BISG posted revenue of around $80 million for its fiscal second quarter.

Other analysts speculate that AmEx had wanted to explore the possibility of combining BISG's back-office operation with its own excess capacity. AmEx could feed off BISG's client relationships and marketing know-how to begin to improve the use factor of its processing center.

ADP has been conspicuously absent from reports of talks within the industry about merging various back-office operations. Shearson was in discussions with Prudential Securities Inc. about such a merger.

"ADP predicted these kinds of consolidations right after the crash [of 1987]," says one industry analyst. "But they were too early, and now they're not players in any of the discussions. It makes you think they may very well just want to unload the operation."