Guest Analysis: Is Acquiring Dead Meat or a Tasty Morsel?

RICK OGLESBY

Sectors have a lifecycle that runs in stages from introduction to growth, maturity, decline and eventually death. The adverse publicity recently piled on the merchant acquiring sector evokes an image of vultures circling over the major firms, awaiting a roadside feast from their soon-to-be rotting carcasses. In this case, however, those vultures will probably drop dead from starvation long before their meal is ready.

Double Diamond Payments Research’s latest report concludes that merchant acquiring is healthy and vibrant, and will continue its path of steady, long-term growth. In fact, this sector will benefit from a technological revolution that offers even greater potential.

The report, Acquiring Acquirers: Why Industry Insiders are Bullish on the Acquiring Sector, takes insight from CFOs around the sector to provide a deep analysis of the market. It identifies key factors such as increased transaction volume fueled by the continued displacement of cash and checks, plus the expansion of value-added products that will drive revenue and margin expansion as well as increase free cash flow. Due to these factors, we expect that sector earnings before interest, taxes, and depreciation (EBITDA) will grow an average of 6.5% each year with EBITDA expanding from US$4.9 billion to US$7.2 billion between now and 2020.

Forty-five percent of consumers still use cash or checks, and fewer than half of all businesses accept electronic payment forms. There are a wealth of companies and government entities seeking to convert these transactions to electronic forms, and smartphone technology provides completely new ways to get these consumers and businesses addicted to electronic payments. Not only that, but mobile technology is changing the way merchants advertise to, and communicate with their customers, driving a whole new stream of investment into new value-added merchant services.

So not only is the acquiring business performing admirably within normal conditions, but acquirers are extremely well positioned to be the service providers that support merchants with a multitude of new, revenue generating services. Does that sound like a dying industry to you?

There should be vultures circling your acquiring business, but they should be a different kind of vulture than the scavengers you might expect. They should be the ones that circle your business seeking an opportunity to invest. These vultures don’t seek rotting meat, but rather tasty morsels that can produce prime returns.

If that’s not happening for your business, then let us know, our report can help you make a better case to your potential investors, adjust your business strategy to maximize valuation, find the best investment or acquisition targets, or build a business case for future initiatives.
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