Wednesday, May 31, 2017
Both companies unanimously approved First Data’s $750 million cash offer for CardConnect’s outstanding shares. Upon completion, First Data will repay CardConnect’s debt and receive $15 per share for the company’s untendered common stock. First Data will use a combination of cash on hand and credit to execute the deal, which is expected to close in the third quarter of 2017.
CardConnect, established in 2006 and based in King of Prussia, Pa., is part of First Data’s existing channel distribution network. The company provides secure, Payment Card Industry Data Security Standard-compliant payment solutions to small and midsize businesses and enterprise-level merchants. Solutions range from ecommerce and business management portals to internal enterprise resource planning systems such as Oracle, SAP, JD Edwards and Infor M3.
Atlanta-based First Data, a leading global acquirer and payment technology provider, works with approximately 6 million businesses, 4,000 financial institutions and 24,000 owner-associates in more than 100 countries, processing more than 2,800 transactions per second, company representatives stated. First Data Chief Executive Officer Frank Bisignano described the merger with long-standing partner CardConnect as “consistent with our strategy of integrating and scaling innovative technologies across our distribution footprint."
CardConnect President and CEO Jeff Shanahan said he expects the transaction to improve capabilities and reach by leveraging “First Data’s breadth of products and its powerful distribution network.”
CardConnect blogger Taylor Havlisch noted the companies’ partnership has lasted for more than 10 years and that First Data was “particularly impressed by [CardConnect’s] rapidly evolving tech portfolio, including our merchant portal CardPointe, partner portal CoPilot, our enterprise security platform CardSecure and our integration solution Bolt P2PE.”
Payments attorney Paul A. Rianda said industry consolidation among acquirers has been a gathering force for more than a decade. In a 2006 article in Transaction World magazine, titled “Why the trend toward consolidation?” Rianda said commoditization and basic economic pressures would continue to drive mergers and acquisitions until a few large processors monopolize the industry.
“We are entering an era where the smaller ISO, given the competitive disadvantage it has from its small size, is almost unable to compete with the larger processors,” he wrote. “This will lead to a situation where the smaller players in the industry will continue to either be absorbed by larger entities or go out of business.”
A report published in May 2014 by global management firm McKinsey & Co. and titled Innovation and Disruption in Payments, authors Robert Byrne and Jason Hanson also found increasing competition and margin compression, particularly among midsize acquirers and national merchants with annual processing volumes between $5 million and $100 million.
“Low growth in what is essentially a scale business will necessitate consolidation along the merchant payments value chain in order to sustain current market valuations,” they wrote. “Firms such as independent sales organizations (ISOs), payments gateways and subscale payments acquirers and processors will need to merge to drive efficiency in a crowded landscape.”
Editor's Note:
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