TRANSACTION TRENDING: MERGERS AND ACQUISITIONS

The summer is coming to a close, and with it a great deal of major partnerships and acquisitions among prominent firms in the payments technology industry.

Even a cursory glance at what has transpired this summer — Vantiv-Worldpay, First Data-CardConnect, myriad PayPal partnerships — and it’s clear to see that the payments industry is in a merger and acquisition frenzy. ETA members have been out in front of this rapidly-developing reality by forging partnerships, monitoring the industry closely and, on many occasions, making headlines themselves.

Transaction Trends asked ETA Members OB Rawls IV, CEO of iPayment, and Todd Linden, CEO of Paysafe Payments Processing North America for their insights on the rapid changes in M+A that the payments industry has experienced.

Q 1: What recent mergers and acquisitions in the payments ecosystem have you had your eye on? Which ones make you most excited?

Todd Linden (TL): Primarily, I keep my eye on the larger deals. To me, that’s any combination of merchant processors and / or acquirers inside the Top 30. Of course, given the timing, the one I’m most excited about right now is my own deal – our acquisition by Paysafe which completed last month! Another step towards a universal payments platform that genuinely expands Paysafe POS activities across offline, online and mobile platforms and enhances our scalability within the North American payments

OB Rawls IV (OBR): It’s been an exciting few years in and around payments with lots of M&A activity. Personally, I have had my eye on the big ones: TSYS and TransFirst, Heartland and Global, First Data and CardConnect and, of course, Vantiv and WorldPay. The legacy ‘bigs’ are getting bigger, but what’s most interesting to me is how they navigate through the consolidation and/or acquisition and what the end game really is. Is it just size and market share? Is it, as in the case of First Data’s CardConnect acquisition, about buying into a key niche/vertical? Is it about delivering incremental value to partners and end customers? In terms of the ‘most exciting’ I think it’s the Vantiv acquisition of WorldPay, which immediately makes Vantiv a global powerhouse and diversifies it from the ongoing retail pressures in the U.S. And, of course, what’s going on with PayPal, Square and Amazon. In August, PayPal purchased Swift Financial to bolster its small business lending efforts.

Q 2:How is the consolidation in the industry impacting your organization?

OBR: Right now, we’re watching from the sidelines. Our phones are ringing for sure and we are also making calls. Sub-ISOs and large agents looking at what else is out there, driven primarily from changes to their existing relationships and I will say that consolidation has opened up some attractive recruiting opportunities as individuals look to depart or have roles eliminated. Consolidation and competition make us sharper, more laser focused. And, like many of our peers, we understand that we must evolve. I’m not sure that’s directly tied to the consolidation occurring, but it’s definitely critical to us. We’re focused on growing both our traditional sales channels and expanding our footprint in our vertical specializations as well including petroleum, convenience stores, parking and unattended, healthcare and others.

TL: It’s redefining the competitive landscape and perspective. Understanding what different combinations of companies mean to the market going forward is a strategic imperative. Our GTM strategies are adjusted accordingly, across merchant, sales and product levels.

Q 3: When assessing a partnership or acquisition, what factors do you consider?

TL: The first thing to do when considering a pairing is to understand who your organizations are and what you want them to be. Then, pair your organisations in a manner that makes both short and long term sense, whether it’s because of gains through access to technology, complimentary market share or more market ‘muscle’.

OBR:When we evaluate a potential partnership and/or acquisition, we begin with the Why? Why would be partner with or acquire the Company? Is there a market share opportunity? Do they have a technology, product and/or talent pool that we need to accomplish our overarching objectives? Do they accelerate our opportunities and positioning within a specific vertical or target? What are the financial considerations? Cultural ones? Does the deal make sense for the Company? Economics of course are a key factor, but more importantly, compatibility with platforms and systems as a tactical consideration and strategically, does the combined entity provide more value to our partners, merchants and shareholders than where we are today. We’re very pragmatic in our approach, oftentimes running parallel path engaging several teams in our assessment so that we expedite the process and get to the root benefit faster. With that said, we carefully balance risk and opportunity with a thorough analysis and financial modeling to arrive at our final decision.

Q 4: How do you evaluate disruption/change in the industry?

OBR: We feel that disruption and change present opportunity. This industry was stagnant for a very long time. Today, there is more competition, from traditional and non-traditional companies, but with that comes more opportunity to grow our business. In the end, we’re focused on the small and mid-sized business and it’s astonishing, but nearly 50% of small businesses still don’t even accept credit cards today. Couple that with the new technologies and our opportunity to expand our value; helping our small business customers leverage meaningful solutions that support their business growth. That’s where we want to be. A value based solution provider for small and mid-sized businesses and the partners that support them.

TL: By technology and/ or distribution.

OB Rawls IV and Todd Linden will join Marc Gardner, CEO of North American Bancard, and Henry Helgeson, CEO of Cayan, on the opening keynote of ETA’s Strategic Leadership Forum October 3-5 in Dana Point, California. The keynote, entitled “The State of Payments: Is it Eat or Be Eaten to Succeed?” will provide actionable insight on making the right choice to prosper and thrive in the increasingly M+A driven landscape of the payments technology industry.

ETA’s SLF is the curated payments event that connects the leaders of today and tomorrow — from C-suite veterans to emerging innovators. Reimagined in 2017, SLF facilitates introductions and personalizes itineraries to accelerate your business objectives in an exclusive oceanfront setting. Click here to register.