First Data 2011 Annual Report Download - page 19

Acquisitions and integrating such acquisitions create certain risks and may affect the Company's operating results.
The Company has been an active business acquirer both in the United States and internationally, and may continue to be active
in the future. The acquisition and integration of businesses involves a number of risks. The core risks are in the areas of valuation
(negotiating a fair price for the business based on inherently limited diligence) and integration (managing the complex process of
integrating the acquired company's people, products, technology and other assets so as to realize the projected value of the acquired
company and the synergies projected to be realized in connection with the acquisition). In June 2009, the Company formed a new
alliance, Banc of America Merchant Services, LLC ("BAMS"), with Bank of America, N.A. Processing, technology and operational
synergies of BAMS are dependent upon the successful migration of the Bank's legacy platform to the Company. Any failure to
migrate the platform or material adverse impact to merchants from potential migration issues could negatively impact the Company's
business and result in a reduction of the Company's revenue and profit.
In addition, international acquisitions often involve additional or increased risks including, for example:
•managing geographically separated organizations, systems and facilities;
•integrating personnel with diverse business backgrounds and organizational cultures;
•complying with foreign regulatory requirements;
•fluctuations in currency exchange rates;
•enforcement of intellectual property rights in some foreign countries;
•difficulty entering new foreign markets due to, among other things, customer acceptance and business knowledge of these
new markets; and
•general economic and political conditions.
The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of the
Company's combined businesses and the possible loss of key personnel. The diversion of management's attention and any delays or
difficulties encountered in connection with acquisitions and the integration of the two companies' operations could have an adverse
effect on the Company's business, results of operations, financial condition or prospects.
Future consolidation of client financial institutions or other client groups may adversely affect the Company's financial condition.
The Company has experienced the negative impact of the substantial bank industry consolidation in recent years. Bank industry
consolidation impacts existing and potential clients in the Company's service areas, primarily in Financial Services and Retail and
Alliance Services. The Company's alliance strategy could be negatively impacted as a result of consolidations, especially where the
banks involved are committed to their internal merchant processing businesses that compete with the Company. Bank consolidation
has led to an increasingly concentrated client base in the industry, resulting in a changing client mix for Financial Services as well as
increased price compression. Further consolidation in the bank industry or other client base could have a negative impact on the
Company.
The Company is subject to the credit risk that its merchants will be unable to satisfy obligations for which the Company may also
be liable.
The Company is subject to the credit risk of its merchants being unable to satisfy obligations for which the Company also may
be liable. For example, the Company and its merchant acquiring alliances are contingently liable for transactions originally acquired
by the Company that are disputed by the card holder and charged back to the merchants. If the Company or the alliance are unable to
collect this amount from the merchant, due to the merchant's insolvency or other reasons, the Company or the alliance will bear the
loss for the amount of the refund paid to the cardholder. The Company has an active program to manage its credit risk and often
mitigates its risk by obtaining collateral. Notwithstanding the Company's program for managing its credit risk, it is possible that a
default on such obligations by one or more of the Company's merchants could have a material adverse effect on the Company's
business.
Changes in credit card association or other network rules or standards could adversely affect the Company's business.
In order to provide the Company's transaction processing services, several of the Company's subsidiaries are registered with
Visa and MasterCard and other networks as members or service providers for member institutions. As such, the Company and many
of its customers are subject to card association and network rules that could subject the Company or its customers to a variety of fines
or penalties that may be levied by the card associations or networks for certain acts or omissions by the Company, acquirer customers,
processing customers and merchants. Visa, MasterCard and other networks, some of which are the Company's competitors, set the
standards with respect to which the Company must comply. The termination of the Company's member registration or the Company's
status as a certified service provider, or any changes in card association or other network rules or standards, including interpretation
and implementation of the rules or standards, that increase the cost of doing business or limit the Company's ability to provide
transaction processing services to or through the Company's customers, could have an adverse effect on the Company's business,
operating results and financial condition.
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