David Foss, chairman and CEO of fintech Jack Henry, speaks with Acuris Capital Intelligence about its acquisition hunt and success amid a tumultuous market.

Interview by Rachel Stone

Q. You’re optimistic about Jack Henry re-entering the M&A game this year. What type of company could make an attractive target?

We have a long track record of acquiring companies and integrating them successfully. We’re a disciplined acquirer.

If you’re a strategic acquirer like us, it’s been difficult to get a deal done the past couple of years because the valuations were crazy. We don’t chase the shiny object. There were deals getting done, but the prices that those deals were going for were just unrealistic for us to pursue. We’ve been on the sidelines for a couple of years.

We saw a lot of fintech companies that went public last year hit hard on valuation. We’re keeping an eye on some of those closely to see if something might pop up where we could jump in.

The greater opportunity will be with companies that were hoping to IPO in 2022. The IPO market has come to a stop in our space. Valuations aren’t anywhere near where they were. You’ve got a company that’s ready to potentially IPO with no market for their public stock. Now they’re asking whether they should raise another round. We think there will be some good opportunities for us in that area as well.

Q. Do you think we’ll start to see the bigger fintechs look to acquire in this market with valuations dropping?

I think everybody has faced the same challenge we did, where valuations were unaligned. With PE seemingly willing to pay anything for anything, it was hard to compete. SPACs last year were hot and we had traditional IPOs as well.

Today, IPOs have pretty much stopped in our space, SPACs have definitely stopped, and valuations have come down. I would think anybody in a similar role to us has got to be thinking the same thing I am, which is that there are opportunities out there.

Some of the smaller companies that listed last year and saw their valuations drop are still in battle mode. As time goes on, they’re probably going to have to start to think differently about entertaining offers for M&A.

Q. Jack Henry is one of the only fintechs with share prices up year-to-date. What’s contributing to that success?

Our financials have been solid this year. We’ve been leading the pack versus our primary competitors in topline revenue growth and continuing to show profitability.

On top of that, we rolled out our technology modernization strategy in February and the market has reacted very positively to that. We’re a 45-year-old technology company. We’ve been discussing how we transition to a public cloud environment and thinking about what the future looks like. How do we serve our customers for the future and ensure that they remain relevant? That story is resonating with investors who believe that we have a bright future.

Bit of background: David Foss is board chair and CEO of Jack Henry & Associates, a technology firm offering payment processing services to the financial services industry. He joined in 1999 when he arranged the sale of BancTec’s financials solutions division to the company. He has more than 30 years of experience in the financial services industry. 

This interview has been edited for length and clarity.