Jimmy Frischling’s Post

You don’t need me to tell you payments M&A had a rough year in 2023.  Overall deal value for fintechs dropped 23% and volume fell 30% through Q3 in 2023 vs. 2022. But it’s not all doom and gloom, if you look closely you’ll notice a fever of smaller deals. Payments companies used M&A to shape the industry in three key ways over the last year: 1️⃣ GEOGRAPHIC EXPANSION: Target assets that strengthen positions in developed markets and expand into untapped geographies (e.g. Rapyd bought PayU GPO to enhance its presence in Latin America and Europe; France-based Market Pay acquired Polish paytech Novelpay). 2️⃣ CAPACITY BUILDING: Cherry-pick assets that add capabilities as customer demand evolves. For instance, complementing acquiring with payroll and disbursements, offering working capital, etc. (e.g. Nuvei gained integrated payment capabilities and industry vertical depth through acquisition of Paya; Marqeta expanded beyond debit and prepaid with its acquisition of Power Finance) 3️⃣ INCUMBENT SEPARATIONS: Re-evaluate lines of business and business models and create value by separating into standalone entities (e.g. FIS divesting the majority of Worldpay) The year 2023 also saw fewer distressed acquisitions than many anticipated. But it’s unclear how much longer cash-strapped smaller companies can hold out as they deplete runway. Indeed, the combination of investor impatience and smaller, attractive fintech companies low on cash will likely lead to heightened dealmaking in 2024, benefiting well-capitalized payment conglomerates and incumbents as they tuck in assets that accelerate their strategic initiatives. I recently co-authored the payments chapter of Bain & Company's annual M&A Report.  Shout out to my payments chapter co-author Tevia Segovia. And kudos to the Bain M&A Report authors Les Baird, Suzanne Kumar, David Harding, Dale Stafford, Kai Grass, and Lindsey White. Link in the comments 👇 #mergersandacquisitions #privateequity #payments

Fiserv, Amadeus vie to acquire Shift4 Payments Fiserv, opens new tab and Amadeus, opens new tab are competing to acquire Shift4 Payments, opens new tab, a payments processor that has a market value of nearly $7 billion, according to people familiar with the matter. Fiserv and Amadeus are the two main contenders in a sale process that Shift4 has been running, and are preparing to submit final offers in the coming weeks, the sources said, cautioning a deal is not certain. The sources declined to discuss the terms of the offers and requested anonymity because the matter is confidential. Shift4 and Fiserv did not immediately respond to requests for comment. Amadeus declined comment. Shares of Shift4, which are up about 8% this year, jumped as much as 13% on the news. Shift4 collects fees from clients, ranging from restaurants, casinos and hotels, to sports teams like the San Francisco 49ers, to facilitate their payments. It processes more than $200 billion worth of annual transactions for over 200,000 customers, according to its website. Payments processors like Shift4 thrived during the COVID-19 pandemic as customers turned to digital payment methods, but some have since struggled to maintain growth amid increased competition and high inflation. Earlier this week, Shift4 reported its fourth-quarter earnings and projected a strong outlook for 2024, with its profit and revenue forecasts coming in ahead of market expectations. Shift4 CEO Jared Isaacman said, opens new tab in a letter to shareholders in November the company was exploring "strategic opportunities and alternatives." In media interviews since then, Isaacman has said the Center Valley, Pennsylvania-based company has fielded acquisition interest from several parties, without naming them. If completed successfully, the acquisition of Shift4 would be the latest in a string of dealmaking in the financial services sector. Recent transactions include Capital One's, opens new tab $35 billion agreement to acquire Discover Financial, opens new tab, Nasdaq's, opens new tab $10.5 billion purchase of Adenza, and GTCR's acquisition of a majority stake in Worldpay that was valued at $18.5 billion. Source Reuters #payments #fintech #mergersandacquisitions

In the payments industry, companies like Mastercard are using M&A to enhance their technology capabilities and expand their service offerings. Recent acquisitions, including Mastercard's purchase of Recorded Future and Minna Technologies, highlight a trend where firms aim to create comprehensive tech stacks to compete effectively in a digital marketplace. With 62 deals announced by mid-October 2024, the M&A landscape is expected to grow, particularly in response to the Fed's interest rate cuts, which may further stimulate deal-making as companies seek to innovate and diversify their revenue models. Find out more in this article: https://heyor.ca/DBsYiy #PaymentsDive #MergersAndAcquisitionsMarket #Mastercard #MANews

Fiserv eyes Shift4 payments acquisition. #Fiserv has thrown its hat into the ring to acquire #Shift4 Payments, a powerhouse in #payments processing. This news comes amidst a competitive race with Amadeus Group, both vying to secure Shift4, a company with a hefty market valuation of around $7 billion, as reported by Reuters. Shift4 Payments, a leading entity that handles over $200 billion in annual transactions for more than 200,000 merchants, is at a pivotal juncture. Having initiated a sales process in recent months, the company, under the leadership of CEO Jared Isaacman, is exploring strategic opportunities that could redefine its future and expand its market reach. The potential acquisition by Fiserv, a major player in financial services technology, could significantly alter the payments landscape, bringing together two giants of commerce and finance. With Fiserv and Amadeus IT Group as the main contenders, the outcome of this acquisition battle could have far-reaching implications for the industry, potentially enhancing or reshaping services for a vast array of merchants in the hospitality and retail sectors. This acquisition interest follows Isaacman's announcement to shareholders about seeking strategic opportunities, indicating a pivotal shift for Shift4 towards broader horizons. The interest from Fiserv and Amadeus, alongside previous speculation around Global Payments, underscores the high stakes and keen interest in the flourishing payment processing sector. As final offers are anticipated in the coming weeks, the industry is on tenterhooks, awaiting the decision that could mark a significant consolidation in the payment processing world. This move accelerate Shift4's growth trajectory but also signal a wave of further consolidations and strategic partnerships within the sector. The article on Finextra in the first comment. Want to stay up to date with the market? Here my newsletter: - Linkedin: https://t.ly/s541W   - Substack: https://lnkd.in/dzfGJzmW

In the payments industry, companies like Mastercard are using M&A to enhance their technology capabilities and expand their service offerings. Recent acquisitions, including Mastercard's purchase of Recorded Future and Minna Technologies, highlight a trend where firms aim to create comprehensive tech stacks to compete effectively in a digital marketplace. With 62 deals announced by mid-October 2024, the M&A landscape is expected to grow, particularly in response to the Fed's interest rate cuts, which may further stimulate deal-making as companies seek to innovate and diversify their revenue models. Find out more in this article: https://heyor.ca/DBsYiy #PaymentsDive #MergersAndAcquisitionsMarket #Mastercard #MANews

US lender Capital One has agreed to buy rival Discover Financial Services for $35.3bn, in an all-stock tie-up that is set to unite two of America’s largest credit card companies.    Capital One’s acquisition of Discover values its smaller rival’s stock 27 per cent above Friday’s closing price. Under the terms of the deal, Discover shareholders would receive 1.0192 Capital One shares for each of theirs.    The merger between Capital One and Discover would shake up the US credit card landscape and mark one of the industry’s biggest deals since the 2008 financial crisis.     Capital One and Discover are two of the biggest credit card lenders, behind JPMorgan Chase and Citigroup. Discover also offers a payment network, making it a competitor with the likes of Visa and Mastercard. https://lnkd.in/ejmb9q9Q #payments #paymentstalk

Worldline: A Cautionary Tale of Growth and the Risk of Falling Behind For years, Worldline has been a cornerstone in the European payments landscape, expanding through key acquisitions like SIX Payment Services and Ingenico On paper, these moves should have cemented their leadership. But what we’ve seen is a different story: a company trying to integrate a patchwork of platforms, struggling to build a cohesive infrastructure that can keep up with the pace of change in today’s market. Despite their size and presence, Worldline's growth has stalled. Revenue projections for 2024 show just 1.3% organic growth—down significantly from the 6% they posted in 2023. Their EBITDA margins have also flattened around 24%, and while cost-cutting efforts like the Power24 program may keep them afloat, they are not enough to ignite meaningful, long-term growth. I can't help but wonder if this stagnation highlights a larger issue. Worldline’s reliance on legacy systems, which it inherited through a series of mergers, left it bogged down by complexity, preventing the agility needed to compete in a rapidly evolving payments space? I believe that this is where the opportunity lies for new acquirers and PSPs who are thinking about becoming acquirers themselves. As Worldline tries to simplify and catch up, the door is wide open for those who are unburdened by legacy infrastructure. The payments landscape is evolving quickly—merchants are no longer just looking for reliable systems; they demand speed, flexibility, and innovation. And that’s where modern, cloud-native solutions shine. Acquirers and PSPs that can offer seamless, real-time payment processing, flexible integrations, and cross-border capabilities are positioned to fill the gaps left by companies like Worldline. The lesson here is that size and legacy are no longer enough to maintain leadership. Agility and innovation are the new currency in payments. To me, Worldline’s story is a reminder that growth through acquisition isn’t always a straight path to success. The companies that thrive in the next wave of payments will be those who can build for the future, not just manage the past. If you want to learn more about how we help new acquirers be agile and innovative, sign up to our newsletter https://lnkd.in/e5bF_5mX

This article points out very well the challenges of the big tanker ships in the payment space today and the next years. While we again see a numerous number of current M&A deals the innovative and flexible speedboats in the market are attempting to overtake the tankers...

Interesting perspective and analysis, especially regarding the complexity of integrating multiple platforms. This can 'make or break' the value of the acquisitions, highlighting the importance of a clear, strategic technical integration plan. Failing to do so can lead to long-term technical debt, which Worldline is experiencing now. Relying on legacy infrastructure limits innovation and creates significant barriers to scaling and maintaining the agility needed to stay competitive in today's fast-moving payments landscape.

Fiserv closed on its acquisition of First Data on July 29, 2019 - five years ago, today. It was the first in a wave of three "fintech mega-mergers" (along with FIS/Worldpay and Global Payments/TSYS) that redefined the banking and payments technology space. I remember white-boarding like crazy with my old First Annapolis colleagues in our office (yes, an office!) around what this could mean for the industry. With the benefit of hindsight, a few observations: 1. To state the obvious - the first movers found the most value. Fiserv shares are up ~120% since the start of 2019, while Global Payments is flat and FIS is down ~20%. Why? Fiserv and First Data were uniquely valuable together in a way that didn't apply to the other two combinations; and First Data's merchant business was better positioned for growth than its peers (largely driven by Clover). 2. The "need" for scale - which was frequently quoted as rationale for each of the mergers - may not have been a "need" at all. Unlocking operating efficiency through scale continues to be challenged by the difficulty of consolidating and retiring legacy platforms. And on the topic of scale-enabled transformative innovation? Not much there. Traditional cards continue to rule the day in the U.S., and rumored closed-loop, "on-us" networks that disintermediate Visa/Mastercard remain a pipe-dream. 3. Sometimes abstinence may be the best path. As one reference point, bank tech provider Jack Henry - which is significantly less exposed to payments than its larger peers and has made smaller acquisitions but no mega-mergers - has seen its share price rise 23% over the past five years. Meanwhile, the FIS-WP separation is at least a partial conclusion that the businesses may be more valuable as focused, standalone entities. (We shouldn't forget that Worldpay itself was the result of a mini-mega-merger between Vantiv and Worldpay less than 18 months prior to the FIS deal...) On another note, it is my first day back at work in a month following the arrival of my second child. I can confirm that growing 33% overnight is highly disruptive to normal operations.