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CoverStory
Merchant acquiring: operating payment businesses in the payments is a vital, utility-like
an outsider's view United States and India. In the United function," he wrote. "Cash flows are
States, Calpian has built a large strong and predictable, and equity
merchant portfolio by acquiring small returns can be easily amplified by
The payments space is a relatively ISOs (under $10 million in revenues). leverage."
new area of interest for investors.
But as this recent post from Baskin "Payments is a difficult business; Webb's comments were contained in a
Financial Services Inc. concerning it takes a lot to scale," Montgomery March 2014 post about the acquisition
Visa Inc. illustrates, investors are said. "The investors who went after of a large Nordic merchant acquirer,
Square are 'shoot for the stars' kind of Nets Holding A/S, by a Danish
keen on the card brands. "[W]e guys." They are gamblers; the smart firm in partnership with Advent
believe Visa is a wonderful business. investors are looking for payment International Corp. and Bain Capital
The company operates a toll-road companies with strong cash flow LLC. Advent and Bain already own
on the credit card highway," wrote and profits, a stable business and a WorldPay, which had been the
Barry Schwart, Chief Investment strategy for growing the business, merchant acquiring arm of the Royal
according to Montgomery. "Payments Bank of Scotland until that bank was
Ofcer and Portfolio Manager at companies with these qualities can forced to sell in the aftermath of the
Baskin, a Toronto-based investment find investors," he said. economic turmoil of 2008.
management frm. Funding growth at Advent also holds an ownership
home and abroad
Schwart posted this assessment interest in Vantiv LLC (formerly Fifth
on Baskin's website in the days For better or for worse, a recent post, Third Merchant Services), which
has grown significantly in the past
following release of Visa's second by Quentin Webb, a columnist who few years through acquisitions.
fscal year quarterly earnings report. writes about mergers for Reuters, However, in March, Vantiv disclosed
portrayed how the general investing
Visa reported positive results with public views electronic payment that Advent would be cashing out
revenues of $3.6 billion for the companies. "[H]andling bank-card its five-year investment, making its
holdings in Vantiv available through
quarter, an 11 percent year-over-year
increase; earnings were up almost 15
percent. But investors skitish over
the potential impact of economic
sanctions against Russia responded
by driving down the company's
share price by almost 5 percent. This
in turn sent the Dow Jones Industrial
Average (DJIA) tumbling. (Visa is
presently the largest component of
the DJIA.)
Schwart downplayed the impact
economic sanctions might have, long
term on Visa, or its rival MasterCard,
and counseled investors to evaluate
Visa in the light of general economic
growth. After all, spending (with
credit cards and other forms of
payment) is what fuels economic
growth, he reminded readers. "[G]
iven the pace of the U.S. economic
recovery, I don't see what Visa could
have done beter," he wrote.
43
Merchant acquiring: operating payment businesses in the payments is a vital, utility-like
an outsider's view United States and India. In the United function," he wrote. "Cash flows are
States, Calpian has built a large strong and predictable, and equity
merchant portfolio by acquiring small returns can be easily amplified by
The payments space is a relatively ISOs (under $10 million in revenues). leverage."
new area of interest for investors.
But as this recent post from Baskin "Payments is a difficult business; Webb's comments were contained in a
Financial Services Inc. concerning it takes a lot to scale," Montgomery March 2014 post about the acquisition
Visa Inc. illustrates, investors are said. "The investors who went after of a large Nordic merchant acquirer,
Square are 'shoot for the stars' kind of Nets Holding A/S, by a Danish
keen on the card brands. "[W]e guys." They are gamblers; the smart firm in partnership with Advent
believe Visa is a wonderful business. investors are looking for payment International Corp. and Bain Capital
The company operates a toll-road companies with strong cash flow LLC. Advent and Bain already own
on the credit card highway," wrote and profits, a stable business and a WorldPay, which had been the
Barry Schwart, Chief Investment strategy for growing the business, merchant acquiring arm of the Royal
according to Montgomery. "Payments Bank of Scotland until that bank was
Ofcer and Portfolio Manager at companies with these qualities can forced to sell in the aftermath of the
Baskin, a Toronto-based investment find investors," he said. economic turmoil of 2008.
management frm. Funding growth at Advent also holds an ownership
home and abroad
Schwart posted this assessment interest in Vantiv LLC (formerly Fifth
on Baskin's website in the days For better or for worse, a recent post, Third Merchant Services), which
has grown significantly in the past
following release of Visa's second by Quentin Webb, a columnist who few years through acquisitions.
fscal year quarterly earnings report. writes about mergers for Reuters, However, in March, Vantiv disclosed
portrayed how the general investing
Visa reported positive results with public views electronic payment that Advent would be cashing out
revenues of $3.6 billion for the companies. "[H]andling bank-card its five-year investment, making its
holdings in Vantiv available through
quarter, an 11 percent year-over-year
increase; earnings were up almost 15
percent. But investors skitish over
the potential impact of economic
sanctions against Russia responded
by driving down the company's
share price by almost 5 percent. This
in turn sent the Dow Jones Industrial
Average (DJIA) tumbling. (Visa is
presently the largest component of
the DJIA.)
Schwart downplayed the impact
economic sanctions might have, long
term on Visa, or its rival MasterCard,
and counseled investors to evaluate
Visa in the light of general economic
growth. After all, spending (with
credit cards and other forms of
payment) is what fuels economic
growth, he reminded readers. "[G]
iven the pace of the U.S. economic
recovery, I don't see what Visa could
have done beter," he wrote.
43
