Amid speculation that a sale of all or parts of financial servicing company BISYS Group of Roseland, N.J., are in the works, one hedge fund manager, Ahmet Okumus, president of Okumus Capital of New York, has been buying up shares of the firm and is looking for a seat on the company's board.

On March 23, Okumus-who owns 12.7 million BISYS shares representing 10.4% of the outstanding shares valued at $148 million-sent a letter to the board suggesting that he join them to "provide practical insight and guidance in considering the company's strategic alternatives."

Okumus, who did not return a call seeking comment, came to the U.S. two decades ago from Turkey, launched his first hedge fund in 1997 and considers himself a deep value manager.

A BISYS spokeswoman didn't respond to inquiries as to whether the board had responded to the Okumus letter, nor to speculation about a potential sale.

This past August, BISYS announced it had hired Bear Stearns to explore "strategic alternatives," fueling speculation that the firm was up for sale. That announcement coincided with the unrelated departure of former president and CEO Russell Fradin, who left to rejoin Hewitt Associates, and the appointment of Board Chairman Robert Casale as interim president and CEO.

A month later, in September, the firm gave retention bonus agreements to several key employees. The first of two payments, with a value of $6.4 million, was paid just four weeks ago, on March 8. The second payment, valued at $13 million, will be payable on Sept. 8 and hinges on two criteria: if those key employees remain with the firm, and if there has been a "change in control" of the company, according to a BISYS regulatory filing.

BISYS' original troubles began in May 2004 when the firm announced it would restate 2001-2004 financial earnings due to an accounting error in its life insurance unit. A second restatement was announced in July 2005. Those restatements sparked investor lawsuits that eventually led to a settlement in late 2006 and payment of $66.5 million to plaintiffs.

In addition, BISYS' initial restatement caused the Securities and Exchange Commission to investigate the matter, leading to the subsequent discovery of BISYS Fund Services' longstanding marketing and distribution agreements with 27 mutual funds that, in essence, included certain kickback payments. Again, without admitting or denying wrongdoing this past October, BISYS agreed to severe sanctions. The SEC ordered the BISYS unit to disgorge $9.7 million and pay prejudgment interest of $1.7 million as well as a $10 million penalty.

More recently, on March 15, BISYS filed its quarterly financial statement and issued a press release indicating that while its alternative investments servicing division had seen revenue growth, its mutual fund servicing business was seeing declines and client losses. Overall, profits for its combined investment services business, roughly 70% of total revenue, were expected to be flat in 2007, in part driven by the "overhang of challenges" in the fund unit. Moreover, the firm declined further earnings guidance and noted it would not host an analyst call.

Right now, it is hard to know exactly what the strategic plans are, who the players might be and whether or not the firm is talking to the private equity community, said David Koning, an equity analyst with R.W. Baird of Milwaukee. The firm has a neutral rating on BISYS and has not been positive on it since 2004. On the bright side, there is a healthy mergers and acquisitions environment, and outsourcing continues to gain acceptance, Koning said.

Within the industry, potential suitors could include SEI of Oaks, Pa., US Bancorp of Minneapolis and JPMorgan of New York. Officials at all three firms declined comment.

However, JPMorgan in late February announced its acquisition of Integrated Investment Services, the transfer agency and back-office fund servicing business of Western & Southern Financial Group, which just about closes the door on a BISYS acquisition, said one industry executive, speaking on condition of anonymity.

Moreover, while it's the bigger banks with the deep enough pockets that are likely to buy BISYS, the fact that the majority of fund clients are bank-sponsored fund groups is likely a turnoff, the executive added.

The fact that a permanent president/CEO has not been named over the last six months could imply the company is close to a sale, analysts speculated. But not having named a permanent top executive may be a cost-saving ploy, too. "If you have a formal CEO, there may be increased payments-retention bonuses-if there's an event," Koning added.

(c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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