Paya’s Deal for Paragon Payments Bolsters Its Offering for Health Care And Non-Profits

Back in March, Paya Holdings Inc. chief executive Jeff Hack indicated his company is eager to build out vertical markets for its processing services, and on Monday it announced a deal that will do just that for Paya’s ambitions in the health-care and non-profit markets.

Atlanta-based Paya said it has acquired Paragon Payments Solutions, a 26-year-old company based in Tempe, Ariz. Details of the transaction were not released, though Paya’s announcement said the company expects to discuss the deal further during a conference call next month to discuss first-quarter performance.

Paya, a fast-growing processor, has drawn considerable momentum in recent years from ties to independent software vendors that serve specific vertical markets, such as municipalities. It has also proven to be acquisitive, with its most recent deal before Monday’s announcement, an acquisition of The Payments Group, representing a scaling up of Paya’s capabilities in payment services for cities and towns. Paragon handles approximately $1.5 billion in annual volume and has served as a distribution channel for Paya since 2011, the company said.

“Through the addition of a high-quality, growing roster of software partners in key verticals, we are able to leverage Paya’s scale and expertise to further accelerate growth while delivering accretive financial returns to our shareholders,” said Paya chief executive Jeff Hack, in a statement. “This [deal] follows our blueprint of executing strategic M&A of integrated payment providers in attractive end markets, serving as a powerful complement to our organic growth strategy.”

Paragon president Brock Robertson will join Paya and will lead its ISV activities, the company said. Roy Bricker, Paragon’s chief executive, will help out with integration of the companies, Paya’s announcement added. Both Robertson and Bricker were formerly executives with Element Payment Services.

The ISV segment is both larger and more profitable for Paya than its direct-processing business. In the fourth quarter, it generated $32.4 million in revenue, with gross profit of $17.3 million. By contrast, the payment-services side of the business produced revenue of $21.6 million, with $10 million in profit, according to numbers Paya released early last month.

Hack, a former First Data and JPMorgan executive, told equity analysts in March that Paya’s momentum among potential clients and in M&A got a jolt last fall when it went public via a merger with a so-called blank-check company, Fintech Acquisition Corp. III. These mergers, which are becoming more numerous in payments, allow privately held firms to avoid a traditional public offering by undergoing an acquisition by a special purpose acquisition company, or SPAC, that has already become a public entity.Paya’s shares were trading at $11.02 at mid-morning Monday, up about 3%.