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CoverStory
a secondary offering. Market observers said they expect He pointed out that both Visa and MasterCard Worldwide
some of that cash to finance additional acquisitions that were embroiled in a legal entanglement with merchants
will complement WorldPay, much like the Nets investment. at the time of their IPOs, with contingencies in place had
the lawsuits not been settled. He said he expects similar
Closer to home, several recent transactions have caught contingencies are being made by Mercury.
the attention of acquirers and their partners. Among
them: Mercury Payment Systems Inc., SecureNet Payment A market for small guys?
Systems and EVO Payments International. Interest in ISOs and their portfolios is not necessarily
limited to the biggest and brightest names in merchant
EVO, formerly EVO Merchant Services, is a U.S. acquirer acquiring. For example, Colorado-based Intrix Technology
that has been expanding internationally through Inc. has been on a buying spree. In April 2014, it acquired
portfolio acquisitions, most notably those of Grupo Banco Witt Merchant Services, a small ISO with a strong
Popular in Spain and Germany's Deutche Bank. Last presence in New Mexico. That was the sixth ISO acquired
year the investment firm Madison Dearborn Partners by Intrix in a year. Intrix executives said they are building
LLC purchased a minority interest in EVO to help fund the company's ISO portfolio on a payment gateway
the acquirer's aggressive acquisition strategy. "Payment that integrates with customer accounting applications
processing is a dynamic industry, with new growth and enterprise systems to better streamline payment
opportunities emerging worldwide each and every day," processing.
said Jim Kelly, EVO's CEO, in announcing the deal.
Although some observers say money is not being invested
Vahe Dombalagian, Managing Director at Madison in merchant acquiring this year at quite the pace witnessed
Dearborn, said, "EVO has a scalable business model in 2013, both Atlas and Abbey are optimistic about the
supported by industry leading end-to-end technology market for well-run smaller ISOs. "We're seeing private
that we think positions the company for sustained equity at all levels of the industry," Abbey said, explaining
growth moving forward." He said the investment would that there are some "really positive case studies" in which
be earmarked for acquisitions, especially international private investors have fared well betting on acquirers,
purchases. EVO President Jeff Rosenblatt added, "There's ISOs and other payments companies. "It's influencing the
a lot of momentum behind our business." prices we're seeing in the market," he added.
Abbey said deals like these are becoming more common: Nonetheless, the experts caution sellers that their
deals involving equity investors with deep pockets that expectations may not always be met. "We see a lot of
help fund ISO and acquirer growth strategies. But not just situations where the value expectations are quite different,"
any ISO or acquirer, and size can often take a back seat to between buyers and sellers Abbey said. The disconnect
underlying technologies. often occurs over technology. He said some buyers are
"just not able to value the assets" in line with what sellers
"Investors are looking for companies with platforms that are looking for. "We're also seeing some sellers selling too
can do big things," Abbey said. He pointed to a recent soon," he added.
investment in SecureNet by the equity investment firm
Sterling Partners. Atlas said he's seen some "broken hearts" over deals that
didn't go the way sellers had expected. He said some of
SecureNet has built a sophisticated software-as-a-service those ISOs have lost out on anticipated future payouts due
platform that it said can readily support the evolution of to shady dealings on the part of buyers. He also said he's
multichannel payment integration, but at the time of the seen situations in which buyers have "purposely reneged
deal it had only about 12,000 merchants. SecureNet is led on payouts" that were promised post sale. "It should be a
by Brent Warrington, an industry veteran who, among warning to sellers that they need to ensure that buyers are
other jobs, was Senior Vice President and General Manager ethical and financially solvent," he said.
at First Data Corp.
Abbey offered another warning: the acquisition process
Also in March, Mercury, which is majority owned by the can be long and involved, and unsuccessful negotiations
private equity firm Silver Lake Group LLC, filed documents can be devastating. It's a major effort to sell, and failing
with the U.S. Securities and Exchange Commission for an can have an impact on morale and a company's financial
IPO that is expected to raise at least $100 million. Mercury, condition, he said.
which plans to list on NASDAQ under the symbol MPS,
has had a controversial tenure in its four-year climb into Montgomery, who has built Calpian by acquiring small
the ranks of leading ISOs and acquirers. ISOs, said he hasn't seen much in the way of competitive
activity this year "It's a lonely segment to be in,"
In early 2014, the company was taken to court by Heartland Montgomery said. But he is optimistic that investors will
Payment Systems Inc., which alleged Mercury was return. "This business has been a darling of the investment
engaging in deceptive pricing practices. Abbey doesn't see community for a long time," he said. He also believes that
the legal entanglement hampering Mercury's planned IPO. although more recently money has been flowing out to
44
a secondary offering. Market observers said they expect He pointed out that both Visa and MasterCard Worldwide
some of that cash to finance additional acquisitions that were embroiled in a legal entanglement with merchants
will complement WorldPay, much like the Nets investment. at the time of their IPOs, with contingencies in place had
the lawsuits not been settled. He said he expects similar
Closer to home, several recent transactions have caught contingencies are being made by Mercury.
the attention of acquirers and their partners. Among
them: Mercury Payment Systems Inc., SecureNet Payment A market for small guys?
Systems and EVO Payments International. Interest in ISOs and their portfolios is not necessarily
limited to the biggest and brightest names in merchant
EVO, formerly EVO Merchant Services, is a U.S. acquirer acquiring. For example, Colorado-based Intrix Technology
that has been expanding internationally through Inc. has been on a buying spree. In April 2014, it acquired
portfolio acquisitions, most notably those of Grupo Banco Witt Merchant Services, a small ISO with a strong
Popular in Spain and Germany's Deutche Bank. Last presence in New Mexico. That was the sixth ISO acquired
year the investment firm Madison Dearborn Partners by Intrix in a year. Intrix executives said they are building
LLC purchased a minority interest in EVO to help fund the company's ISO portfolio on a payment gateway
the acquirer's aggressive acquisition strategy. "Payment that integrates with customer accounting applications
processing is a dynamic industry, with new growth and enterprise systems to better streamline payment
opportunities emerging worldwide each and every day," processing.
said Jim Kelly, EVO's CEO, in announcing the deal.
Although some observers say money is not being invested
Vahe Dombalagian, Managing Director at Madison in merchant acquiring this year at quite the pace witnessed
Dearborn, said, "EVO has a scalable business model in 2013, both Atlas and Abbey are optimistic about the
supported by industry leading end-to-end technology market for well-run smaller ISOs. "We're seeing private
that we think positions the company for sustained equity at all levels of the industry," Abbey said, explaining
growth moving forward." He said the investment would that there are some "really positive case studies" in which
be earmarked for acquisitions, especially international private investors have fared well betting on acquirers,
purchases. EVO President Jeff Rosenblatt added, "There's ISOs and other payments companies. "It's influencing the
a lot of momentum behind our business." prices we're seeing in the market," he added.
Abbey said deals like these are becoming more common: Nonetheless, the experts caution sellers that their
deals involving equity investors with deep pockets that expectations may not always be met. "We see a lot of
help fund ISO and acquirer growth strategies. But not just situations where the value expectations are quite different,"
any ISO or acquirer, and size can often take a back seat to between buyers and sellers Abbey said. The disconnect
underlying technologies. often occurs over technology. He said some buyers are
"just not able to value the assets" in line with what sellers
"Investors are looking for companies with platforms that are looking for. "We're also seeing some sellers selling too
can do big things," Abbey said. He pointed to a recent soon," he added.
investment in SecureNet by the equity investment firm
Sterling Partners. Atlas said he's seen some "broken hearts" over deals that
didn't go the way sellers had expected. He said some of
SecureNet has built a sophisticated software-as-a-service those ISOs have lost out on anticipated future payouts due
platform that it said can readily support the evolution of to shady dealings on the part of buyers. He also said he's
multichannel payment integration, but at the time of the seen situations in which buyers have "purposely reneged
deal it had only about 12,000 merchants. SecureNet is led on payouts" that were promised post sale. "It should be a
by Brent Warrington, an industry veteran who, among warning to sellers that they need to ensure that buyers are
other jobs, was Senior Vice President and General Manager ethical and financially solvent," he said.
at First Data Corp.
Abbey offered another warning: the acquisition process
Also in March, Mercury, which is majority owned by the can be long and involved, and unsuccessful negotiations
private equity firm Silver Lake Group LLC, filed documents can be devastating. It's a major effort to sell, and failing
with the U.S. Securities and Exchange Commission for an can have an impact on morale and a company's financial
IPO that is expected to raise at least $100 million. Mercury, condition, he said.
which plans to list on NASDAQ under the symbol MPS,
has had a controversial tenure in its four-year climb into Montgomery, who has built Calpian by acquiring small
the ranks of leading ISOs and acquirers. ISOs, said he hasn't seen much in the way of competitive
activity this year "It's a lonely segment to be in,"
In early 2014, the company was taken to court by Heartland Montgomery said. But he is optimistic that investors will
Payment Systems Inc., which alleged Mercury was return. "This business has been a darling of the investment
engaging in deceptive pricing practices. Abbey doesn't see community for a long time," he said. He also believes that
the legal entanglement hampering Mercury's planned IPO. although more recently money has been flowing out to
44
