Thursday , March 28, 2024

In a Bid to Build on Strengths, TSYS Clinches a $2.35 Billion Deal To Buy TransFirst

Processor Total System Services Inc. (TSYS) is buying acquirer TransFirst Holdings Inc. for $2.35 billion, Columbus, Ga.-based TSYS announced Tuesday.

The deal, which is expected to close in the second quarter, puts an end to TransFirst’s plans to explore an initial public offering. Hauppauge, N.Y.-based TransFirst last October filed an S-1 registration statement preliminary to an IPO. TransFirst initially prepared for a partial IPO in 2014. It later put that on hold when private-equity firm Vista Equity Partners, San Francisco, purchased TransFirst from Welsh, Carson, Anderson & Stowe, a New York City-based private-equity firm that bought TransFirst in 2007.

Tuesday’s announcement means that TransFirst, with more than 235,000 small and mid-size merchants, will become part of a larger, more diversified processor that counts more than 500,000 merchants as customers.

“TransFirst significantly increases our scale and opportunity within the highly attractive merchant space, and particularly the profitable and fast-growing small and medium-sized business segment,” M. Troy Woods, TSYS chairman, president, and chief executive, said in a press release. “With the added strength of TransFirst, TSYS will be uniquely positioned with significant scale and strength across issuer processing, merchant services, and prepaid program management.”

TransFirst also has distribution deals with more than 1,300 organizations that include integrated software vendors, health-care organizations, not-for-profits, referral banks, associations, and e-commerce entities.

Once the deal closes, John Shlonsky, TransFirst’s president and chief executive, will replace Mark Pyke as senior executive vice president and president of the company’s merchant segment. Pyke, who joined TSYS in 2010, will leave the company.

TSYS has been interested in TransFirst for the past two years, Jared Drieling, business intelligence manager at payments consultancy The Strawhecker Group, tells Digital Transactions News. “It definitely makes sense for a couple of reasons,” Drieling says. “Clearly, TransFirst is a little more focused on small and mid-size businesses, where TSYS has a little more focus on larger retailers. As we’ve seen with other merchant acquirers, the more profitable segments are in the small and mid-size sector.”

“Having a partner-centric model allows us to have mass access to a large number of [small and medium-size] merchants in a very cost effective and efficient manner,” Shlonsky says in a video about the deal posted to YouTube.

The other factor is that the TransFirst acquisition is an opportunity for TSYS to broaden its products and services, Drieling says. “TSYS has been somewhat conservative on the technology front, especially along the omnichannel front,” he says. Other processors have already begun to tackle how to offer payments services when the lines between physical and digital payments are blurring, he says. “TransFirst really brings together other areas, such as integrated payments and omnichannel services.”

Like the recently announced Global Payments Inc. deal to buy Heartland Payments Inc., the TSYS-TransFirst deal is about building on top of what each company already has developed, Drieling says.

The Global-Heartland deal was about trying to increase the combined company’s market share in more profitable merchant segments, Drieling says. That’s the case with the TSYS-TransFirst transaction, as well, he notes.

“TransFirst has a strong focus on education, nonprofits, and health care,” he says. “But, more important is the relationships they’ve been able to build to get to these sectors. When you look at TransFirst and their relationship model—all those relationships with [independent software vendors]—TSYS will gain from those relationships.”

Where the deal, once completed, might face challenges is in integrating the two companies, Drieling says. That could be because, at least when compared with other large processors, TSYS’s operating units appear to be more independent of each other, he says.

For now, at least, TransFirst’s leadership isn’t concerned about fitting in with its new parent. “When you think about the values of TransFirst—trust, innovation, collaboration—it’s exactly what TSYS stands for,” Shlonsky says in the video. “It’s why I’m 100% confident that this will be a seamless integration for both companies.”

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