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CoverStory
Pucci's predictions proved accurate. First Data Corp.'s Fortney identified several predictable phases. Following is
CardConnect and BluePay acquisitions, followed by a closer look at each stage and its inherent opportunities
Vantiv-Worldpay and TSYS-Cayan, made headlines in and challenges.
2017.
1. Building the relationship: The initial discov-
Pucci recently told The Green Sheet he sees mergers ery phase involves getting acquainted with a
becoming more technology-centered and verticalized. prospect's personality, culture and potential con-
"Legacy acquirers may merge with gateways and cross- tribution to your organization. Consider how a
border specialists to bolster ecommerce volume," he said. potential partner could further your end goals,
"Payment security, another major category, is a crowded and don't rush the process, Huber suggested. The
field with a lot of talent. Mastercard buying New Data Global Legal Law Firm's recent merger with the
Security and LexisNexis acquiring ThreatMetrix are recent Ghilezan Law Firm is a case in point. "Our firms
examples. Security firms make attractive acquisitions, even began working together over three years ago sim-
for acquirers with their own resources and competencies." ply cross-referring business that was within each
respective firm's expertise," he said. "Discussions
Andy Payment, Principal at Symbiom, a business-to- regarding a partnership occurred almost immedi-
business marketing consultancy, expects M&A activities ately after seeing how the two firms complement-
to create new opportunities for his fintech clients. "The ed each other."
entire industry is reshaping itself around value-added
software and solutions," he stated. "Running a software 2. Vetting the candidate: Having confirmed a
company is drastically different from running a payments candidate's potential value, additional due dili-
company. You'll continue to see a reshaping of the market gence is required to fully vet the prospect. Online
as long as there are software and service assets available, reviews and insights from sales channel partners
even if at ridiculous valuations." and merchant customers can help create a dimen-
sional profile of a prospect's reputation and in-
Attorney James Huber, Partner at Global Legal Law dustry ranking. Huber said, "The best way to vet
Firm and payments specialist, said mergers can improve a potential partner is to ask others in the industry
efficiencies and free merchant level salespeople (MLSs) to regarding their experience and dealings." McCro-
focus on what they do best, which is selling. Huber sees a han recommends discretely gathering intelligence
strong future for MLSs and ISOs, despite ever-changing from customers and, if possible, the prospect's in-
industry regulations. vestor base.
"In the near future, we expect to see further consolidation 3. Aligning interests, setting goals: Once the
of the ISOs and agents under the larger ISOs," he said Long candidate has been fully vetted, companies can
term, he forecasts greater consolidation due to increasing focus on the business fit between the organiza-
regulation, such as card scheme rules or self-regulations tions and set key objectives for the merger. How
that require sub-agents and ISOs to be registered direct do your customers make money and which of
and abide by card brand policies. That level of control your solutions give them cost efficiencies? If you
could make a sub-ISO, agent, or even ISO an employee understand your customers and your customers'
of the ISO or processor, which he believes would lead to customers, you understand how to make money,
greater consolidation. save money and control operations, Pucci ex-
plained. "This requires an up-front plan and road
Six degrees of unification map, and then to work backwards to see how the
As he reflected on the "merger mania" of 2017, former Street partner will further that goal," Huber stated.
Smarts columnist Jeff Fortney, Vice President of ISO
SM
Channel Management at Clearent LLC, wrote, "It seemed 4. Structuring the deal: When entering into a de-
we couldn't go more than two months without hearing finitive agreement, Huber recommends having
about another sale or merger. These announcements an attorney well-versed in payments thoroughly
usually follow a similar pattern: reference the synergy review proposed terms and conditions. "Many
of the two companies, talk about how the acquirer saw agreements have obligations that simply are not
opportunity to expand into a specific niche and then, possible," he stated. "And in many circumstances,
finally, share a projected close date (which usually falls it does not matter what the agreement states be-
two to four months into the future)." cause the party that controls the cash flow has su-
perior bargaining power."
Fortney's article "Don't let acquisitions catch you off guard"
appeared Jan. 8, 2018, in issue 18:01:01 of The Green Sheet, McCrohan said making the numbers work is im-
two months before Clearent was acquired by a private perative. "Avoid making any revenue synergy
equity firm. While no two mergers are completely alike, assumptions in the deal model," he added. "Cost
synergies should take into consideration natural
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