Thoroughly knowledgeable,
very pragmatic and
quick-thinking

Chambers Guide

Blog

Keep up to date with our blog articles, latest news and industry developments. See below for the latest posts or use the category listings to hone your search for stories of interest.

Growth in number of non-cash transactions sees spate of deals in payment processing sector

There has been a flurry of acquisitions and investments involving payment processors in recent months, with a focus on European targets. The payment processing sector has attracted particular interest from private equity firms, although processors themselves have made a number of major acquisitions. Notable transactions in recent months include:

July 2017

European private equity group Permira bought a 10-per-cent stake in Swedish payments firm Klarna, with the deal reportedly being Permira’s first foray into the FinTech sector. The investment followed the previous month’s acquisition by Visa of an undisclosed number of shares in Klarna.

French payments company Ingenico bought its Stockholm-based rival, Bambora, from the Nordic Capital private equity group for $1.7bn. Nordic Capital’s sale of its stake, three years after acquiring Bambora, saw it quintuple its original investment.

August 2017

Leading US card processor Vantiv agreed a deal to merge with Worldpay, Britain’s biggest payment provider, for $12.1bn. The deal represents a significant increase on Worldpay’s $7.4bn valuation on its IPO in 2015 and demonstrates a further increase from 2010 when an 80-per-cent stake had been sold for $2.7bn. Once combined, the payment processing powerhouse will be valued at $29bn.

Private equity firms Blackstone and CVC Capital Partners agreed a $3.9bn deal to acquire Isle of Man-based payments processor Paysafe Group. Paysafe itself, in the same month, acquired Merchants’ Choice Payment Solutions, based in Texas, for $470m.

September 2017

US private equity firm Hellman & Friedman offered $5.3bn for Danish payment processor Nets, the leading processor of card payments in the Nordic region. The deal is one of the largest private equity takeovers in Europe for several years and represents a modest increase on the $4.5bn valuation Nets was awarded at the point of its IPO in 2016.

French payments company Worldline completed the acquisition of the leading payment processor in the Baltic states, First Data Baltics, for €73m (around $85m), a move intended to accelerate its expansion in Baltic countries and the wider Nordic region as part of its pan-European consolidation strategy.

October 2017

Ingenico announced another acquisition, this time of Spain’s IECISA Electronic Payment System for an undisclosed sum, with the aim of expanding its direct-to-retail offering and strengthening its position in the Iberian market.

Worldline also completed another acquisition – of Sweden-based Digital River World Payments – as part of its plan to increase its internet payment capabilities and expand its global coverage. The deal, the value of which remains undisclosed, expands Worldline’s coverage to USA, Brazil and Sweden, each a new territory for the company.

German online payment service provider Heidelpay, backed by specialist private equity firm AnaCap Financial Partners, acquired Hamburg-based StarTec Payment & Service. Heidelpay plans to combine StarTec’s cashless point-of-sale solutions with its own system to produce a single payment platform.

 2017 marks 10-year high in deals in the sector

Data compiled by Bloomberg shows that, in the 12 months to August this year, expenditure on deals involving internet financial services firms increased more than seven-fold. This has made 2017 the most prolific year, deals-wise, in over a decade.

According to the 2017 World Payments Report released in August, the number of non-cash transactions rose by over 11 per cent between 2014 and 2015 – the largest increase in a decade.

The report predicts that the volume of global non-cash transactions will exhibit strong growth in the next few years, which it attributes to the “rising adoption of alternate payment instruments, growing financial inclusion and regulatory initiatives based on digital payment models, increasing financial literacy, and enhanced payments network infrastructure, especially in developing markets“.

 WAB comment

With the soaring popularity of non-cash transactions both on- and off-line, it is no surprise that investors are keen to partake in the e-payment action.

Private equity firms especially are attracted by the chance to profit from the shift to cashless spending. They are well-positioned to assist entrants to the rapidly evolving payment-processing sector with strategic advice and investment, using their expertise to create lasting value – something evidenced by the increased sums paid for some of the companies listed above.

There are challenges facing the payment processing industry, however, such as increased regulation and the need for constant innovation, along with the associated costs. Furthermore, given the small margins made by payment processors, economies of scale provide the key to success in an increasingly competitive market. Processors are therefore looking to consolidate in order to achieve cost synergies, expand their global reach and cross-border capabilities, and compete with more agile start-ups.

With the popularity of cashless transactions expected to increase for the foreseeable future, it seems likely that more acquisitions, both by private equity firms looking to capitalise on the growth of e-commerce and payment processing companies wanting to increase their market share, are on the horizon.

This blog post was written by Suzanne Whiteman, Associate for White & Black. 

Disclaimer: This article is produced for and on behalf of White & Black Limited, which is a limited liability company registered in England and Wales with registered number 06436665. It is authorised and regulated by the Solicitors Regulation Authority. The contents of this article should be viewed as opinion and general guidance, and should not be treated as legal advice.

This site uses cookies to improve your user experience. By using this site you agree to these cookies being set. To find out more see our cookies policy