Monday , November 18, 2019

Payments Companies Are Getting Pricier, Researcher Says

Note to payments-company owners: now just might be the right time to sell. Buyers in 2019 have paid more for firms in the payment-tech space since at least 2010, according to a new analysis by 451 Research of more than 1,100 deals over nearly a decade.

The median price to sales ratio paid for payments companies so far this year is 5.7, the highest since 2012’s ratio of 5.2, according to the findings from New York City-based 451 Research’s M&A KnowledgeBase service based on disclosed and estimated transaction values. The ratio was 4.1 in 2018, 3.7 in 2017, 2.2 in 2016, and 2.7 back in 2010.

“Amid a wave of consolidation, payment providers are commanding a premium,” 451 Research senior analyst Scott Denne said in a report issued just after Global Payments Inc. and Total System Services Inc. (TSYS) announced Tuesday they had struck an all-stock deal in which Global will acquire TSYS for more than $21 billion. “Long-standing companies in that market are fending off a laundry list of changes, driving larger deals and a willingness to pay up.”

Four dollars of every $10 spent by buyers on technology firms this year have gone to a payments company, Denne said, citing M&A KnowledgeBase data. Preceding the Global/TSYS deal this year were announcements of pending acquisitions of First Data Corp. by Fiserv Inc. and of Worldpay Inc. by Fidelity National Information Services Inc., as well as 31 smaller deals involving payment-technology vendors with a total value of $81.7 billion.

“While this year’s total is a high point, the trend has been building for some time,” Denne said. “Each of the two previous years also saw more than $10 billion spent on payment targets, something that’s only happened in one other year since 2008.”

451 Research says 2018 saw 115 payments-related deals with a total value of $13.1 billion. In 2017 there were 114 mergers or acquisitions valued in total at $30.8 billion, the second-highest total since 2010. Rather than list the deals by enterprise value as they are frequently reported in the media, 451 backs out the debt involved and adds in cash.

Global Payments is valuing TSYS at 6.1 times trailing (preceding 12 months) revenue, well above the 4-times median for the entire decade, Denne said. He also noted that processor Nuvei Technologies is paying a similar multiple in its acquisition, also announced this week, of the United Kingdom’s SafeCharge for $889 million.

“Those transactions helped propel the median multiple for payment deals up to 5.7 times for 2019, according to our data,” he said. “As the number of potential targets with scale shrinks, payments are looking pricey.”

Check Also

Could a Move in the German Parliament Break Apple’s Hammerlock on the NFC Chip?

Ever since Apple Pay debuted in 2014, Apple Inc. has kept the near-field communication chip …

Do NOT follow this link or you will be banned from the site!