HNC Inc.'s decision to be acquired by Fair, Isaac & Co. Inc. surprised many industry observers, even though most agree that the two companies have complementary technologies. Indeed, some experts say the merged company, which will assume the Fair, Isaac name, will become a "dominant" provider of analytic and decision management products to financial services firms.In April, Fair, Isaac, based in San Rafael, Calif., agreed to acquire HNC in a stock deal that was valued at $810 million. Tom Grudnowski, Fair, Isaac's CEO, is slated to become chief executive of the merged company.

"The idea is to put two powerhouses together," says John Mutch, president and CEO of San Diego-based HNC. "The area of business analytics is growing, and the combination of Fair, Isaac and HNC puts us in an even better position to leverage this market opportunity."

"My gut reaction is that this is a good idea," says James Bisker, director of the insurance practice at TowerGroup, Needham, Mass. "Technologically, HNC is the superior company, but Fair, Isaac has had better success selling the technology."

The merger makes sense to those analysts who believe the two companies have complementary technologies. "The combination will produce a company that will be a dominant provider of analytic and decision management products to financial services providers," says Kimberly Harris, research director with Gartner Inc., Stamford, Conn.

"But the possible impact on insurance is unclear. Insurance has never been a strong focus for Fair, Isaac. The merger may slow the development of insurance solutions unless Fair, Isaac broadens its scope," she adds.

Some stock analysts, however, didn't welcome the news with open arms.

"You have a company that is doing well but it's stock is cheap, and it turns around and sells out, and I can't figure out why they did it," says Rob Tholemeier, a senior research analyst with Wells Fargo Securities, who immediately downgraded HNC's stock from 'strong buy' to 'underperform.' "I can't think of one software company merger that has succeeded." he says.

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access