Article

Cardtronics goes after big business

After years of building its ATM network 'one machine at a time,' Cardtronics is ready to start multiplying a little faster. The new growth strategy is starting to add up with the acquisition of McLane FSP.

October 3, 2001

Cardtronicsbecame one of the country's largest ISOs by selling ATMs to Mom and Pop Merchant. In an effort to continue its aggressive growth, the Houston-based company is now setting its sights on Big Daddy Business.

Cardtronics signaled its intent to pursue large corporate accounts with its acquisition of McLane FSP, announced today. Financial terms of the deal were not disclosed.

McLane FSP is a wholly-owned subsidiary of theMcLane Company, a Temple, Texas-based food distributor. Unlike most ISOs, the majority of FSP's 1,100 machines are multi-location deals with national chains like Sunoco.

The addition of FSP's ATMs will cement Cardtronics' status as the country's fourth-largest ISO – behind E*TRADE ATM, Access Cash and American Express – with about 6,400 ATMs under contract.

Doug Deitel, Cardtronics executive vice president, said his company is well positioned to service corporate accounts because of its strong sales, service and customer support infrastructure, as well as the experience it has gained in working with smaller retail clients.

"We've built our network one machine at a time, and we've learned a lot of things in the process," Deitel said. "We've already been through just about every possible thing that can go right or wrong."

Many ATM deployers, ISOs and financial institutions alike, did not have the benefit of experience when they signed their first corporate clients in the mid-1990s, Deitel said. Consequently, he thinks that many retailers may seek better deals as their original contracts expire.

Like others in the industry, Deitel believes that a large number of five-year contracts were signed in 1996 and 1997, after the widespread introduction of surcharging. If that's the case, many of these contracts will expire this year and next.

The opportunity is particularly ripe for large ISOs like Cardtronics, Deitel said, noting that some financial institutions are scaling back retail ATM deployments or pulling out of the retail market altogether because their machines were not profitable.

"The ISO model is built on a whole different dynamic than the bank model, and I believe that it will be the one that prevails," he said. "We approach this market not as a financial institution, but as an entrepreneur. We analyze every cost, so we can build a profitable model around smaller volume locations."

The McLane FSP name will transition to Cardtronics over the next six months. Operations will continue out of FSP's current headquarters in Temple for at least the next 12 months. Ten employees of McLane FSP will join Cardtronics; the rest will continue to work for the McLane Company.

"We're taking a workmanlike approach to this transition," Deitel said. "We're going to go in with the McLane people and introduce ourselves, and show those customers that they're going to receive the same kind of service from us that McLane built its reputation on."

Cardtronics grew its network by nearly 2,000 machines this year even before the McLane acquisition, many of them in new market areas such as the Northeast.

Cardtronics, which was founded in 1989, was also selected for the third consecutive year as one of Houston's 100 fastest growing small businesses. The University of Houston Small Business Development Center compiles the annual Houston 100 list, which is based on sales growth over a three-year period. Cardtronics was number 66 in 1999, number 13 in 2000 and number 11 this year.

 Other acquisitions could be in Cardtronics' future. However, Deitel said, "We see our long-range position as conservative. We're not in the market to scoop up every machine in the landscape."