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doesn't it make sense that Corp., as portfolios on these platforms are highly sought after, and the
you would need to know at marketplace of buyers is substantially larger than that of other proces-
what rate those cash flows sors.
will attrit (lessen) over time? 4. Through the use of some form of software-based business manage-
It's really that simple. What's ment solution, the portfolio would have a material concentration of a
not so simple is understand- niche industry type, such as veterinary or medical offices.
ing which aspects of a portfo-
lio's attrition most buyers pay 5. A condition of the portfolio purchase would be that the seller would
the most attention to. agree to not only support the book, but also write new business with
the acquiring organization.
Six or seven years ago, it was 6. Having year-over–year credit and debit card charge volume attrition
the year-over-year revenue/ of less than 50 percent would put the portfolio in the rarest of echelons
residual attrition. Today, and guarantee it would price at the highest end of the market range.
you'll find a lot more buyers
modeling in the credit and If anyone knows of a merchant portfolio similar to the one described, please
debit card charge volume let me know. I'm sure I can find a buyer for it. Short of that, though, it would
attrition as opposed to rev- behoove any ISO owner or merchant level salesperson to try to build a book
enue attrition because of all with similar attributes.
the new fee-based revenue
mixed into the total revenue
number. ISOs are constantly
adding and taking away fees, Adam Hark is co-founder of MerchantPortfolios.com, a dba of Preston Todd Advisors Inc. With
which can make it difficult over a decade of experience in the payments industry, Adam specializes in M&A, growth and exit
to extract a meaningful year- strategies, and asset and enterprise valuation for payments processing and payments technology
over-year revenue attrition companies. Adam Hark can be reached at adam@merchantportfolios.com or 617-340-8779.
number. However, card vol-
ume is a much cleaner num-
ber, and thus can give a buyer
a much more accurate read of
the true performance of the
portfolio over time.
The perfect, most
valuable portfolio
There's no such thing as a perfect
portfolio, but with an insider's eye
and a keen understanding of the pri-
mary drivers of portfolio value, it's
not too difficult to conjure up a mer-
chant portfolio that all other portfo-
lios would strive to be. Here's what
I think that book would look like
based on the stated primary drivers
of value:
1. The portfolio would con-
tain at least 500 merchant
accounts to avoid any risk-
concentration issues.
2. The top 25 percent of mer-
chant accounts (in terms of
revenue) would account for
less than 60 percent of total
portfolio revenue.
3. The book would be pro-
cessing through Total System
Services Inc. or First Data
31
doesn't it make sense that Corp., as portfolios on these platforms are highly sought after, and the
you would need to know at marketplace of buyers is substantially larger than that of other proces-
what rate those cash flows sors.
will attrit (lessen) over time? 4. Through the use of some form of software-based business manage-
It's really that simple. What's ment solution, the portfolio would have a material concentration of a
not so simple is understand- niche industry type, such as veterinary or medical offices.
ing which aspects of a portfo-
lio's attrition most buyers pay 5. A condition of the portfolio purchase would be that the seller would
the most attention to. agree to not only support the book, but also write new business with
the acquiring organization.
Six or seven years ago, it was 6. Having year-over–year credit and debit card charge volume attrition
the year-over-year revenue/ of less than 50 percent would put the portfolio in the rarest of echelons
residual attrition. Today, and guarantee it would price at the highest end of the market range.
you'll find a lot more buyers
modeling in the credit and If anyone knows of a merchant portfolio similar to the one described, please
debit card charge volume let me know. I'm sure I can find a buyer for it. Short of that, though, it would
attrition as opposed to rev- behoove any ISO owner or merchant level salesperson to try to build a book
enue attrition because of all with similar attributes.
the new fee-based revenue
mixed into the total revenue
number. ISOs are constantly
adding and taking away fees, Adam Hark is co-founder of MerchantPortfolios.com, a dba of Preston Todd Advisors Inc. With
which can make it difficult over a decade of experience in the payments industry, Adam specializes in M&A, growth and exit
to extract a meaningful year- strategies, and asset and enterprise valuation for payments processing and payments technology
over-year revenue attrition companies. Adam Hark can be reached at adam@merchantportfolios.com or 617-340-8779.
number. However, card vol-
ume is a much cleaner num-
ber, and thus can give a buyer
a much more accurate read of
the true performance of the
portfolio over time.
The perfect, most
valuable portfolio
There's no such thing as a perfect
portfolio, but with an insider's eye
and a keen understanding of the pri-
mary drivers of portfolio value, it's
not too difficult to conjure up a mer-
chant portfolio that all other portfo-
lios would strive to be. Here's what
I think that book would look like
based on the stated primary drivers
of value:
1. The portfolio would con-
tain at least 500 merchant
accounts to avoid any risk-
concentration issues.
2. The top 25 percent of mer-
chant accounts (in terms of
revenue) would account for
less than 60 percent of total
portfolio revenue.
3. The book would be pro-
cessing through Total System
Services Inc. or First Data
31
