POS Portal Acquisition Will Add Payments Components to ScanSource’s Offerings

The pending $145 million acquisition of point-of-sale terminal and equipment distributor POS Portal by ScanSource Inc. will bring together two companies that provide merchants with the equipment they need at checkout counters and back offices, but which have little overlap in their customer bases and distribution channels.

Founded in 2000, Sacramento, Calif.-based POS Portal has 180 employees and sells terminals and supplies through “thousands” of independent sales organizations, agents, and merchant acquirers and processors that serve small and mid-sized businesses, chief executive and co-founder Buzz Stryker tells Digital Transactions News. The company also offers encryption-key libraries for point-to-point data encryption and related security needs, and works with independent software vendors to provide merchants with tablet-based POS systems.

Greenville, S.C.-based ScanSource, meanwhile, is a specialty distributor of barcode scanners, cash drawers, and other POS equipment for enterprise and middle-market merchants, products distributed to the merchants through thousands of value-added resellers. But ScanSource hasn’t sold stand-alone countertop payment terminals typically found in small stores and restaurants.

ScanSource has been eyeing POS Portal’s market for several years, a market that looked even more attractive with the coming of EMV chip card payments to the United States, according to Paul Constantine, co-president of ScanSource’s worldwide barcode, networking and security business.

“We’ve known Buzz for a long time,” Constantine says. “We saw a huge opportunity in the payments space.” ScanSource floated the idea of a corporate pairing earlier, and although nothing resulted at the time, the companies remained in touch. “We don’t shop in the bargain bin, we go for quality,” says Constantine.

VeriFone Systems Inc., the leading U.S.-based manufacturer of POS payment terminals, estimates that even though many big retailers have now replaced their old magnetic-stripe card readers, opportunities remain to install about 5 million more EMV terminals.

“Those merchants … need EMV terminals now,” says Stryker. “It made perfect sense for ScanSource to reach in and acquire us.”

Announced Thursday, the companies expect the acquisition to close by Sept. 30. ScanSource initially will pay $144.9 million in cash for POS Portal, plus an earn-out payment of up to $13.2 million on Nov. 30. The earn-out’s size will depend on POS Portal’s earnings before interest, taxes, depreciation and amortization (EBITDA) for the trailing 12 months ended Sept. 30. For the first full year after closing, ScanSource estimates POS Portal’s net sales will be about $110 million, with an EBITDA margin in the low teens.

Stryker will remain CEO of POS Portal, which will operate as a “parallel business” and retain its brand, at least for the near term, according to Constantine. Scott Agatep, POS Portal’s chief operating officer, also will be joining ScanSource’s management team.

ScanSource is a publicly traded company that in addition to providing POS and barcode equipment sells products and services for data networking, physical security, and video and voice communications. The company reported net income of $12.4 million for the quarter ended March 31 on sales of $813.5 million.