f synergy is the cornerstone of a successful merger, EVO Merchant Services is lucky to have landed the aptly named Cynergy Data. The companies notified ISOs in August of their intent to merge, subject to approval by federal regulators. The new entity will be called EVOcynergy.

EVO Chief Executive Officer and President Ray Sidhom will be CEO of the combined company. Cynergy Data CEO Marcelo Paladini will be President of EVOcynergy. EVO's Jeff Rosenblatt will be Chief Operating Officer, running business operations.

"As our industry continues to evolve and competition intensifies, Cynergy Data and EVO are combining forces to leverage each other's strengths," stated the companies' joint announcement to ISO partners. For the first six months, it will be "business as usual." They will make minimal changes to day-to-day operations. EVOcynergy will eventually integrate proprietary platforms.

Economies of scale

The merger gives the new entity processing scale and is a way to protect both organizations in the current business climate, said Brian Riley, Senior Analyst, Bank Cards, for research and consulting firm TowerGroup. The top five merchant acquirers are so large as to account for 90% of the market, he noted in the recent report "Taking charge: Essentials of U.S. bank card acquiring." This dominance leaves the biggest players little room for more consolidation.

As smaller acquirers grow and, in this case, merge, they render themselves less subject to buyout by the big five without raising antitrust concerns. "Further compression in the U.S. market may elicit accusations of anti-competitiveness," Riley observed. He expects more industry merger announcements before the end of the year. "It's a part of survival." In rankings below the top five players, transaction volume plummets, Riley said.

'Two decent-sized guys'

The EVO-Cynergy deal "is not an 'Oh, wow!' merger, but these are two decent-sized guys," Riley said.

GSQ's 2004 survey of acquirers ("The charge for the lead," Vol. 7, No. 4, December 2004) ranked EVO No. 17. The company processed an estimated $8.17 billion that year in credit and offline debit transactions. EVO claims it is the sixth largest nonbank processor. Cynergy Data, which was founded in 1995, processes $1.6 billion annually, and was ranked No. 29 in 2004 by GSQ.

"What is interesting about Cynergy," Riley said, "is they were fast growing. They doubled their volume for 2005. If I had that kind of business growth, I'd keep it up until it stopped growing."

EVO, founded in 1989, is a registered member service provider (MSP) of HSBC Bank, N.A. Cynergy is an MSP of Bank of America, N.A. These different relationships "give them a lot more flexibility in how they position themselves," Riley said. EVO does a lot of nonbranded processing of fleet cards, he added.

"The artful tradition and proven experience from EVO, combined with the sophisticated technology from Cynergy Data, will offer a tremendous opportunity" for their respective ISOs to provide advanced merchant solutions, the joint announcement stated. Dual headquarters will be maintained in New York City and Melville, N.Y.

"Our challenge is to provide you with advanced technology, superior service and best-in-class products and services to ensure you have the tools needed for long-term growth of your business," the companies told their ISOs. "EVOcynergy has raised the bar in the payment processing industry and has positioned itself to meet this challenge."