Private Equity vs. Private Ownership: The Truth About Software Acquisitions for Bankers

Introduction: Does it Really Matter Who Owns My Software?

Short answer, yes–it matters. Why? Because a company’s means of ownership is directly tied to its methods of leadership. And since the decisions software providers make inevitably impact the banking customers they serve, it’s important for bankers to understand what drives them.

Spoiler alert–profit is what drives private equity firms and investors, NOT the long-term success of community bankers.

The Difference: Private Equity vs. Private Ownership

While both examples of private funding, private equity and private ownership have little in common beyond that.

Private equity firms, by design, invest in businesses with the goal of making as much money on the investment in as short of time as possible. In software acquisitions where private equity is involved, we see the same approach across the board: investors purchase the software company, do all they can to increase revenue, decrease cost, and “build to sell” for the sake of their own pockets, and don’t think twice about how it affects the bankers relying on them.

Private ownership, however, still enables a software company to make decisions on their own terms and timelines–but the motivations driving these decisions are entirely different. Rather than working to figure out how to build the company up just to turn around and sell, private ownership tends to have a longer-term, more innovative and customer-focused vision of the company’s continued success. Add a board of directors and shareholders with an emotional tie to the company’s mission and customer-base, and it isn’t hard to see this reflected in every decision the company makes.

What 100% Bank Ownership Means to DCI

Keith Hughes, Chairman of the Board at DCI, shares:

“We’ve always said, DCI is by bankers, for bankers. It’s the foundation of what sets our service and technology apart, and while it shouldn’t be the rare commodity it is, we are 100% private. Bank ownership means we’re motivated to provide world-class service to our banks and generate a reasonable return in order to reinvest in technology to meet the needs of our community banking customers. Our competitors just can’t say the same.”

To DCI, being privately owned allows for intentional funding and budgeting with customer satisfaction and success at front-of-mind. Thanks to decisions driven by real bankers, NOT investment firms, the prioritization of the customer experience leads to differentiators like:

Regular, face-to-face and on-site meetings with bankers
24/7, U.S.-based support
Agile and innovative cloud-based, .net core technology
Customer access to our executive leadership
Continued advocacy for bankers in partnerships with vendors, etc.

Cameron Romer, Officer of Information Technology and Information Security at Johnson City Bank in TX, says of his experience:

“Since partnering with DCI, their service has been nothing short of exceptional. From the very beginning, their team has demonstrated a deep understanding of our requirements, providing tailored solutions that have significantly improved our operations. The reliability of DCI is outstanding…what sets them apart is their proactive customer service. The team is always responsive, knowledgeable, and eager to help…we consider DCI the gold standard and couldn’t be happier with the partnership and would highly recommend them to all other banks.”

Next Steps for Bankers Impacted by Software Acquisitions

If your bank’s software provider has recently undergone a private equity acquisition and you’re seeing its impact through things like product sunsetting, technology that cuts corners, or lack of personalized customer service, consider this:

Your priority is your bank’s long-term prosperity. So, why should you look to a short-sighted software provider owned by private equity investors whose feet are already halfway out the door to help get you there? If continued innovation and evolution in community banking is what your bank aims for, then it deserves a software provider and partner with a common goal.

Software conversions aren’t half the stress of watching your bank be brought down by a sinking ship–especially if you have the right team to back you. Start with asking the right questions to potential providers, and go from there.

But if strict contracts or circumstances limit your bank’s flexibility today, we suggest taking the following steps to advocate for your bank’s success in the meantime:

Set up a meeting between your bank executives and your software provider
1. Don’t let this request be ignored or dismissed
2. Establish an agenda of talking points/pain points for your bank
3. Ensure your team is on the same page going into the meeting
Clearly communicate your bank’s goals, and what you need from your provider to reach them
1. Ask the difficult questions–what is their plan to ensure a smooth transition from A to Z? How will they help you achieve X?
Leverage your existing resources and connections
1. Connect with resources like your state and national banking associations
2. Get in touch with banking customers on your same software, can you combine your voices to reach a fair outcome?

Bottom line, it’s important to know who owns your bank’s software, and what their long-term plans to support YOUR success are–not what short-term plans they have to support their own. Because in a fast-changing industry landscape, it’s not just the relationship between your bank and its provider that will feel the impacts of software ownership–your customers will feel it, too.