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His Appetite for Acquisitions Is Voracious

"I'm a gobbler. That's what I do." - Steve Kane

So says one of the industry's most astute and admired executives. But Steve Kane's soft-spoken demeanor and slow, deliberate choice of words slyly masks that tenacious urge to gobble. What sates his appetite? Why companies, of course. And he eats a lot! (This much: 135 acquisitions in 10 years.)

Steve's hunger comes from his passion for business. So, then, the obvious question: What business philosophy fuels that passion?

"Everyone gives too flip an answer when asked to talk about their philosophy toward business," says Kane. "I think mine has always been the same, but I'm not naïve to think it hasn't evolved over time. Integrity is key. I have always believed that service is what distinguishes a great company and personal integrity with how you deal with people, both your customers as well as your management team and employees."

What keeps Steve motivated?

"My motivation is internal, not external. It is the internal drive that causes somebody to take a great deal of enjoyment out of what they're doing, no matter how difficult it is," says Kane. "All of us are frustrated architects. We like to build and grow things. It is that pleasure in seeing something grow and build that causes us to want to deal with all the challenges and opportunities of American business."

Long before he was making businesses healthy, Steve was headed toward a lifetime of making people healthy - he was going to be a doctor.

Born and raised in Herrin, a town of 11,000 in southern Illinois, Kane received a Bachelor of Science degree in chemistry and biology from the University of Alabama. He next enrolled at the University of Illinois graduate school, intending to earn a degree in molecular biology as a prelude to medical school. It was a family legacy - Steve's grandfather, father and brother were all physicians.

However, Steve saw medicine changing from the way his grandfather and father practiced it. There were the early signs of managed care dictating to protocol as opposed to personal care and doctors treating people as they saw fit.

Also, for Steve, medicine didn't produce the adrenaline rush that business did. Believing a law degree would be a valuable tool, whether he practiced or not, Steve changed his career path and received a law degree in 1969 from the University of Alabama School of Law.

Steve's first position was with American General Life Insurance Company. Working in a variety of capacities, Steve's duties were largely administrative. As Assistant to the President of American General Life's profitable Nashville operation, Steve was a great student of that "seek out and suck up" strategy.

As the fourth-largest insurance company worldwide, American General Life typified the merger-and-acquisition concept of growth through gobbling. During his 15-year tenure, Steve sharply honed his business management and acquiring skills. Then in 1984, together with a small group of executives, Steve formed Endata - through acquisition, of course. His group acquired a computer-service company from none other than American General, changed its name and took it public the following year.

As Executive Vice President and General Counsel, Steve helped maintain its success for the next several years. In 1987, he sold it to First Financial Management Corp., a publicly held holding company with a lot of individual operational companies - and joined FFMC's team as its first general counsel. Steve moved to Atlanta and changed the face of FFMC. From 1987 to 1995, when Steve sold FFMC to First Data Corp., FFMC acquired and sold such notable organizations as TeleCheck, NaBanco and Western Union, just to name a few gobblees.

"As Vice Chairman of FFMC, it was my responsibility to establish and implement strategic business programs as well as manage all mergers and acquisitions," says Kane. "I took good management teams, eliminated the administrative negativity of acquired companies, assisted in growth strategy and operated them as effectively as possible."

It seems Kane made good on his promises. Take NaBanco, for example. According to Kane, when FFMC acquired NaBanco in 1987, its assets were $80 million. When NaBanco was sold, its assets were $800 million.

During his FFMC days, Steve also was Director of Basis Information Technology, a division of FFMC that did all financial institution data processing; a Director of PMT Services; a Director of National Computer Print; and a Director of NOVA Corp.

As if all those directorships didn't keep him busy enough, Kane also formed his own business-consulting firm during this time. In April 1987, Steven D. Kane Enterprises was created to provide merger-and-acquisition strategies to those in need. The dinner bell was rung.

When FFMC was sold to First Data in November 1995, Steve took some time off, got his financial affairs in order and jumped back into the M&A fray. In May 1997, he joined the board of PMT Services as a consultant. He was intricately involved in the sale of PMT to NOVA in September 1998 and joined NOVA's board until the sale to U.S. Bancorp in June 2001.

In April 1999, Steve personally hooked up International Payment Services with GTCR Golden Rauner. As one of America's leading private-equity investors, GTCR has $4 billion in equity capital. Its philosophy and strategy is identifying and partnering with executive teams in fragmented and growing industries.

GTCR considered payment processing to be dramatically growing but fragmented with players. It needed someone to get its capital in the game. That someone was Steve Kane.

"GTCR approached me because of my position in history with First Financial Management Corporation," says Kane. "They had been after me to work with them in the development of a payment-processing organization to engage in a strategy to consolidate and roll up part of that industry."

The result was International Payment Services, a holding company of GTCR Golden Rauner - and the gobbling began at a rapid pace.

Steve put together an impressive team, and in June 1999 it acquired NPC Check Services and renamed it International Check Services. CVE/ Computer Cheque was acquired in November 1999. That same month, Kane's group acquired Direct Express, changed its name to Pay Station America and subsequently sold it to American Payment Systems in October 2000.

In December '99, it acquired CheckCare Enterprises and Checkcare USA - headquartered in Georgia and franchisor of 70 franchised territories. It then acquired four franchised territories back from owners and formed CheckCare America. Other acquisitions included United Check Control in March 2000 and Continental Financial Systems in May 2000.

Kane says his greatest challenge has been to find the right number and proper quality of people to work with to maximize his opportunities. Has he made any bad choices in whom he picked? Periodically, he's been disappointed by a few people who have been given the opportunity and squandered it.

"In the early days, being given the opportunity to run a $50 million business - I would have killed for it, and I'm using that term literally," says Kane. "Today, you see a lot of young executives who are not willing to pay the initial price, to display the initial degree of dedication, and that is a little disheartening. They want it fast and quick without learning what they should learn."

And what is it that Kane believes they're not learning? That experience is the best teacher.

At age 59, Kane has interviewed many bright young people with excellent academic credentials. He's shocked by their degree of expectations - they all expect to be at the top of management instantly. His generation understood how important it was to grow slowly and build a broad base of information. But Kane is quick to point out that it didn't mean one had to stay at one company.

"I'm a firm believer in what I call the mobility circle," says Kane. "Being mobile creates accomplishment and accomplishment creates mobility. By moving from one position to another, you create accomplishment, and that accomplishment enables you to grow as rapidly as you can, given the right opportunity."

Kane cites his daughter as a good example of a bright young executive who has made the choice not to think she deserves to be at the top immediately. A young MBA-to-be (a degree Kane is paying for, he adds), his daughter worked in the business community for five years before making the decision, albeit with help from her dad, to go back to graduate school.

"It will further her career because it will position her to be well-educated and exposed to a number of bright people who can broaden her perspective and help her understand the totality of business, not the single discipline," says Kane. "You must understand how the company financially operates, whether you are the numbers person or not."

Kane believes every person who is a manager or senior manager of a company ought to know how the company is doing and why it's doing well - or not doing well. Why? His response is simple: "Otherwise, how can they be empowered to take the right action?"

What action is Kane taking next on the business buffet table? He's putting together a team of experienced, bright, multicultural, disciplined executives who have been there, done that already and are ready to take the payment-processing industry to the next plateau. This team will have the experience and wisdom to deal with entrepreneurs as well as the ability to manage without over-institutionalizing the organization.

Sounds lofty? It is. And it centers around the ISO arena.

"I think the ISO community went through a period of total lack of appreciation in the '90s until about 1995, when the industry began recognizing that the real superstars who were developing the credit card marketplace were in the ISO community," says Kane. "These are the people out there selling to middle and lower markets day in and day out, reaching the segment of the communities that the lions can't effectively reach."

Kane recognized that larger companies, to a lesser extent, had been focused on the ISO marketplace, but after the major mergers not as many people were concerned with effectively developing opportunities within the ISO space.

"ISOs are looking for strong, loyal partners with a commonality of interests," Kane says. "We value them."

And Kane sees that value as an opportunity to create a strong group of ISOs who want liquidity, independence and the ability to maintain their entrepreneurial spirit. By being a partner who can create clout and improve the ISOs' market share, Kane believes he can provide the payment-processing industry with a unique and powerful entity.

"Not all ISOs want to be round pegs," says Kane, "If you can manage and work with them effectively, you can create a strong network. It is challenging, which is probably why not many people have undertaken such a task."

Kane says that his company, Steven D. Kane Enterprises, together with IPS, is interested in being a significant player in the ISO community and credit card world. He envisions that within the next 12 months he will have created a new entity that focuses on middle and lower markets through a grouping of either owned or affiliated ISOs that will have both the benefit of being associated with a larger entity and have the opportunity, as the stock market improves, to be part of a public company.

Kane is ready to start the meal. He's lining up venture capital but clearly says that GTCR Golden Rauner might not be the source of that capital.

"GTCR could be a partner, but we have an arrangement with a variety of other entities who can provide the money," says Kane. "We have several significant venture partners prepared to assist us in putting together hopefully the next significant group of companies in the credit card arena."

He's lining up possible new management, should he not stay with the management of the soon-to-be gobblees, and, of course, a new name.

"I have the ability through various venture firms to create different entities," Kane. "That's what we do at the holding company - focus on acquiring and merging while the operating company focuses on internal operations."

And what type of ISO is Kane seeking to focus on for his new entity? "Our motto is to find a good company with good management to deliver superior service and engage in strong internal and external growth," says Kane.

Kane recognizes the many challenges ISOs face and respects them for their marketing ability to come up with new and creative solutions in the credit card marketplace. He hopes they, in turn, will recognize this opportunity to work with a strong parent, or partner.

"Most ISOs are undercapitalized," says Kane, "They have not run a much larger organization, but many would like to. We can provide them with that kind of opportunity. That is our singular focus."

So there it is. Kane is creating an ISO consortium and is actively looking for players.

Not looking to pre-assign, Kane wants to work with all. He'll examine what he can provide them. He'll review the growth opportunities associated with the merchants the ISOs bring to the table that could increase the consortium's processing services as well as establish clout with third-party businesses to improve pricing.

And of course, don't forget his vision of ISO participation in a public company. "Who is the next significant player going public?" he asks. "We want ours to be the next one."

Kane continues, "I don't want to be boastful or inappropriate in what I say, but at the same time I don't have any reservation in indicating to people that this is what we are desiring to do. We want the ISO community to be aware that we have the same interest at heart. We respect their individuality and think there is a real opportunity here."

Everyone in the industry has watched the recent big mergers and acquisitions. Concord, Star, NOVA, US Bancorp, Tasq, FDC, Global - all changing partners and taking on attributes that are not bad but not in keeping with the entrepreneurial spirit, according to Kane.

"Their focus is not right or wrong, but if you get too big, it just doesn't make sense," says Kane. "Our subsidiaries don't feel like stepchildren. We truly help them grow their business into the number one segment in their industry."

Kane compares his acquisitions to ISOs, all operating differently with their own unique personalities. Yes, they do have to do certain things in certain ways in keeping with what the parent prefers, but Kane insists they have some autonomy when running their business.

"I'm a businessman who happens to be an attorney with 135 acquisitions in 10 years," says Kane. "I never minimize the importance of the operating team. You've got to give them their ability to operate independently. Our experience in diversity is crucial. We can't change companies. We're not brain surgeons, we are managers."

ISOs looking for an opportunity to be part of an innovative concept that just might change the main course of the ISO industry are invited to contact Steve Kane at 404-760-4700 or e-mail him at Skane@intlps.com.