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Education
portfolio's value is therefore dependent on the stability, This process will remain until the full portfolio of residuals
conventionality and vitality of your merchants' various is purchased, or however else the agreement stipulates. In
businesses. most cases, your MLSs will then receive the opportunity
to stay on with the acquiring company and build a new
A portfolio of brick-and-mortar retailers will, for example, portfolio. There may occasionally be exceptions that
likely obtain a higher multiple for acquisition; a portfolio would allow you to continue to pay your agents, so long as
consisting solely of online merchants and e-commerce that payout process can be verified each month.
residuals might bring in a lower offer.
9. Each processing platform is
6. Client retention is an important factor considered as separate portfolio
The type of merchants you maintain and your total Some MLSs have merchants on a variety of processing
monthly residuals are important factors in the portfolio platforms. And although together they may equal an
evaluation and appraisal process, but your history with attractive residual imbursement, potential acquiring
the merchants is also key. You may have hit a peak in sales, companies will look at each processing platform you work
but that doesn't necessarily mean it's time to sell. with as a separate portfolio and purchase only those that
appeal to them. Although purchasers may be interested
Acquiring companies will likely want to see your merchant in more than one, it might make the most sense for you
history dating back 12 months, and your attrition rate to spend time building each up individually, or focusing
will be a deciding factor in whether they are interested at first on the most promising portfolio, if their value and
in purchasing. Since client retention is such an important potential is not well distributed.
aspect of your portfolio's value, make sure you don't have
a significantly high attrition rate within the previous year 10. Companies may set minimum
before putting your portfolio on the market. requirements for purchasing
7. Companies want to see a The more your portfolio earns, the better the offer you'll
year's worth of paperwork receive. But some MLSs are surprised to find that their
smaller portfolios aren't attracting any prospects at all.
Just as you'll find with any financial investment, the Because of the level of risk, research and labor-intensive
paperwork and files requested will be significant – from effort involved in the acquisition process, larger companies
the research and due diligence on the acquirer's part to often set a minimum monthly recurring residual prospects
the final legal agreement. Interested purchasers will first must maintain for purchase consideration.
sign a nondisclosure, then request organized statements
dating back at least one year, if not longer, which will be A good company will offer you options and might be
meticulously reviewed and verified. able to recommend you to a company better suited for a
portfolio of your size. Some might offer you a credit line
They will want copies of the current legal agreements and an opportunity to become a strategic partner and
between you and your processing platforms to understand process through their platforms.
what percentage you receive from processing fees and
to examine any stipulations, such as expiration dates or I hope these guidelines provide a good foundation for
challenges to the acquisition or redirection of residuals, understanding the primary aspects of any acquisition.
that may impact the deal. But the most important aspect of any prospect is integrity.
8. Monthly agent payouts will be factored in Because of the ease and frequency of fraud in the payments
industry, even the language in a contract is not enough for
For ISOs with monthly agent payouts, it's often thought an acquiring company to feel confident of your interest in
that their business model would negatively affect their protecting and maintaining its investment. Due diligence
desirability among prospective purchasers, or their ability will include an examination of your past dealings and
to sell at all. But agent payouts matter little if your portfolio industry relationships, and likely, conversations with
is solid and well managed. mutual associates.
Although a company will likely only buy a portion of your In the end, the evaluation of your integrity will be the
residuals at first, the entirety of your residuals will reroute number one factor in determining the level of interest you
through its processing stream, meaning your remaining will garner from prospecting companies, so if professional
residuals will, from then on, be routed to you from that integrity is an aspect of your selling proposition, you're off
company. The same will go for your MLSs. The acquiring to a great start.
company will take its guaranteed residuals, then pay all
of your agents' guarantees, then you will receive what Richard Sachs is the Director Portfolio Acquisitions for TouchSuite, one of
remains. the country's foremost payment technology companies. You can reach
him at rsachs@touchsuite.com.
52
portfolio's value is therefore dependent on the stability, This process will remain until the full portfolio of residuals
conventionality and vitality of your merchants' various is purchased, or however else the agreement stipulates. In
businesses. most cases, your MLSs will then receive the opportunity
to stay on with the acquiring company and build a new
A portfolio of brick-and-mortar retailers will, for example, portfolio. There may occasionally be exceptions that
likely obtain a higher multiple for acquisition; a portfolio would allow you to continue to pay your agents, so long as
consisting solely of online merchants and e-commerce that payout process can be verified each month.
residuals might bring in a lower offer.
9. Each processing platform is
6. Client retention is an important factor considered as separate portfolio
The type of merchants you maintain and your total Some MLSs have merchants on a variety of processing
monthly residuals are important factors in the portfolio platforms. And although together they may equal an
evaluation and appraisal process, but your history with attractive residual imbursement, potential acquiring
the merchants is also key. You may have hit a peak in sales, companies will look at each processing platform you work
but that doesn't necessarily mean it's time to sell. with as a separate portfolio and purchase only those that
appeal to them. Although purchasers may be interested
Acquiring companies will likely want to see your merchant in more than one, it might make the most sense for you
history dating back 12 months, and your attrition rate to spend time building each up individually, or focusing
will be a deciding factor in whether they are interested at first on the most promising portfolio, if their value and
in purchasing. Since client retention is such an important potential is not well distributed.
aspect of your portfolio's value, make sure you don't have
a significantly high attrition rate within the previous year 10. Companies may set minimum
before putting your portfolio on the market. requirements for purchasing
7. Companies want to see a The more your portfolio earns, the better the offer you'll
year's worth of paperwork receive. But some MLSs are surprised to find that their
smaller portfolios aren't attracting any prospects at all.
Just as you'll find with any financial investment, the Because of the level of risk, research and labor-intensive
paperwork and files requested will be significant – from effort involved in the acquisition process, larger companies
the research and due diligence on the acquirer's part to often set a minimum monthly recurring residual prospects
the final legal agreement. Interested purchasers will first must maintain for purchase consideration.
sign a nondisclosure, then request organized statements
dating back at least one year, if not longer, which will be A good company will offer you options and might be
meticulously reviewed and verified. able to recommend you to a company better suited for a
portfolio of your size. Some might offer you a credit line
They will want copies of the current legal agreements and an opportunity to become a strategic partner and
between you and your processing platforms to understand process through their platforms.
what percentage you receive from processing fees and
to examine any stipulations, such as expiration dates or I hope these guidelines provide a good foundation for
challenges to the acquisition or redirection of residuals, understanding the primary aspects of any acquisition.
that may impact the deal. But the most important aspect of any prospect is integrity.
8. Monthly agent payouts will be factored in Because of the ease and frequency of fraud in the payments
industry, even the language in a contract is not enough for
For ISOs with monthly agent payouts, it's often thought an acquiring company to feel confident of your interest in
that their business model would negatively affect their protecting and maintaining its investment. Due diligence
desirability among prospective purchasers, or their ability will include an examination of your past dealings and
to sell at all. But agent payouts matter little if your portfolio industry relationships, and likely, conversations with
is solid and well managed. mutual associates.
Although a company will likely only buy a portion of your In the end, the evaluation of your integrity will be the
residuals at first, the entirety of your residuals will reroute number one factor in determining the level of interest you
through its processing stream, meaning your remaining will garner from prospecting companies, so if professional
residuals will, from then on, be routed to you from that integrity is an aspect of your selling proposition, you're off
company. The same will go for your MLSs. The acquiring to a great start.
company will take its guaranteed residuals, then pay all
of your agents' guarantees, then you will receive what Richard Sachs is the Director Portfolio Acquisitions for TouchSuite, one of
remains. the country's foremost payment technology companies. You can reach
him at rsachs@touchsuite.com.
52
