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CompanyProfile

ISO/MLS contact:
Christopher Hernandez
President
212-631-8110, ext. 330
chernandez@portfoliobuyer.com
www.portfoliobuyer.com

The right buyer for your portfolio

fter fielding requests from ISOs interested in After an offer is made and accepted, a purchase agreement
selling portfolios and from investors seeking is completed along with a redirection from the processor,
to purchase them, Christopher Hernandez whereby the seller changes bank information from theirs
A transitioned from ISO lending to linking port- to the buyer's to allow future residual payments to revert
folio sellers with active buyers. In January 2016, Portfolio to the buyer. Once the buyer receives confirmation of
Buyer launched and has since amassed a highly quali- payment redirection from the payment processor, the
fied and targeted network of buyers with no minimum transaction with the seller is then executed.
or maximum restrictions on portfolio size, according to
Hernandez. "A transaction means anywhere from 100 percent upfront
in a few cases, but more typically between 70 to 80 percent
The process for sellers begins with an initial questionnaire upfront, and then depending on the structure, between
consisting of non-proprietary questions, such as number 10 to 15 percent at month 12, and 10 to 15 percent as the
and type of merchants, name of processor, etc., which final payment at month 24," Hernandez said, noting that
is followed by a call to discuss such things as seller to mitigate risk, buyers prefer to keep the seller vested in
motivation, whether the seller wants to retire or stay in the portfolio for at least two years, with an attrition clause
business and work with the buyer. Non-disclosure and in place for the term.
fee agreements are then signed.
Valuation builders
The fees to sellers are straightforward. "The fee is very A number of factors can impact the value of a portfolio
simple to calculate," Hernandez said. "There are no and ought to be considered before entering sales
upfront fees. It is one multiple. If a company sells for 30 arrangements. "On the low end, one is that it's high risk,
multiple, I'll get one and the selling company will get 29. meaning a high residual income, but very low merchant
For example, if a $10,000 monthly residual sells for 30 count," Hernandez said. "Another would be what type of
times ($300,000), the seller would receive $290,000 and merchant they are. Are they all ecommerce or are they
we would receive a $10,000 fee. Anything over $100,000 in brick-and-mortar? What their sales agreement looks like
monthly residual income, that multiple becomes one-half also plays a role."
multiple."
High-value portfolios, on the other hand, tend to have a
On average, the multiple on portfolio valuations ranges high merchant count, diverse range of merchants, no high
from 26 to 30, but can be lower for high-risk portfolios or concentration, low attrition rates, a solid processor, and a
more for top-notch portfolios. Portfolio Buyer's fee is paid well-constructed sales agreement.
out of the proceeds of the sale by the buyer at the time of
closing. An important consideration is seller commitment to the
buyer after the initial transaction. "Buyers love it when
Once the fee agreement and NDA are in place, the seller somebody wants to partner, to stay on board in one fashion
submits 12 months of residual statements and sales or another, meaning either to partner or be an agent of the
agreement, at which point buyers are contacted. Buyers buyer," he said. "That helps improve value considerably.
also sign non-disclosure agreements with Portfolio Buyer That shows they're not looking to cut and run." Having
to protect sellers. Data collected is forwarded to selected a second or third portfolio that acts as collateral against
buyers for review and underwriting. Interested buyers the attrition on the sale of the first one can also add to the
are then connected with the seller via conference calls to valuation, he noted.
discuss further details.

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