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Education

Five reasons why acquirer with high account attrition and materially
lower sales volume and revenue attrition ought not to be
buyers will spurn immediately disqualified.

This type of data trend typically indicates that the ISO
your ISO is losing smaller, non-revenue producing or revenue-
negative accounts, often to the Squares and Stripes of the
world. As such, it's not necessarily a negative reflection on
the property.
High risk

If an acquirer has a large percentage of high-risk accounts
and continues to board the same, then that acquirer is
likely to have a hard time finding a buyer in today's
marketplace. Whether the high risk perceived by a would-
be buyer is deemed to be regulatory (CFPB), bank related
(transactional chargeback percentage higher than 2
percent, on average), or reputational (businesses deemed
to be immoral or unethical), the acquiring property
remains a "no touch" acquisition for the majority of the
marketplace.

In addition, even if a buyer would be interested in a
By Adam T. Hark predominantly high-risk platform, the inherent nature of
Preston Todd Advisors high-risk merchant accounts with exposure to regulatory
and/or bank risk pigeonholes that property into a low
often write about the attributes of merchant acquir- valuation range, which is more often than not, far too hard
ing platforms that create long-term value and whet to overcome to get a deal done.
the appetite of companies that seek to acquire the
I same, but what about looking at your business the No hook
other way? What about looking at the attributes of your Run-of-the-mill payment processing platforms – those
company that are abject turn-offs to the marketplace, to that market to all types of small and midsize businesses
the point where buyers won't even consider acquiring and compete solely on price and customer service – lack
you? what I call a "hook." They don't possess nor do they offer
a differentiator that allows them to successfully sell to
One could argue this exercise is simply a different pathway specific business verticals or groups of people.
to the same information and conclusions; however, I would
argue that it's not. What I'm providing here are single The most successful acquirers operating today – defined
factors – sole attributes – of merchant acquirer businesses by high growth and high retention – typically have a
that can (and do) cause buyers to walk away at first blush. hook that allows them to access high-value, niche verticals
These five reasons that buyers won't acquire your ISO are and hold those merchant accounts, resulting in very high
true market killers. retention rates.
Churn
Hooks today come in multiple forms. For many merchant
Attrition or retention, however you choose to look at it, is acquirers, hooks come in the form of specific business
the number one market killer. Any buyer of an acquiring management software. For others, the hook can be the
platform, whose most valuable asset is its merchant sales channel itself. Independent software vendor (ISV)
portfolio, will almost without exception look first at the partners who resell payments are highly sought after today
retention of merchants, and the effects the retention rate for the combined technology/payments value proposition,
has on sales volume and revenue. So if at first glance a which in turn creates a high retention situation. Even
buyer sees your churn rate is high, there's a good chance culture and language can be an effective hook. Plenty of
that buyer will disqualify your property and move on. ISOs find themselves locked into specific communities
of businesses as a direct result of a shared cultural or
That being said, one particular data trend has taken hold linguistic background.
over the past 24 months and ought to be fully understood
by both buyers and sellers before either contemplates a The net takeaway here is that without a hook, many buyers
transaction: account attrition consistently runs higher won't have genuine interest in investing in or acquiring
than sales volume and revenue attrition. This means that your company.
it is possible, and I would argue likely, that a merchant
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