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Priority Technology Holdings Inc. announced early Thursday it is expanding aggressively into automotive servicing with its acquisition of DMSJV LLC, also known as Dealer Merchant Services, a payments provider whose capabilities include surcharging to help dealers cover transaction costs.
Terms were not announced, but Alpharetta, Ga.-based Priority said a $35-million increase in what it calls a “broadly syndicated” term loan paid for part of the deal. Priority executives expect a near-term payoff, noting that the deal will generate approximately $3 million in incremental revenue for the company in the fourth quarter alone.
“We believe that emerging trends for auto ownership among consumers and the evolving needs of dealerships as the community consolidates, position the combination of our payments and banking technology to deliver exceptional value to the dealership community that DMS serves,” said Tom Priore, chairman and chief executive at Priority, in a statement.
As payments processors look to expand into new markets, higher average sales tickets are proving to have a potent allure. Automobile dealerships, in particular, could have appeal on that score alone, observers say. Generally speaking, dealerships can constitute “a portfolio with a higher-than-average ticket size,” notes Cliff Gray, principal at Gray Consulting, along with “very low chargebacks.”
Dealers are also likely to have advanced payments technology already in place. “Most dealers have integrated POS,” Gray says, referring to point-of-sale technology. Amberly Allen, founder and managing partner at DMS, is joining Priority as part of the deal, as is Laura Sherman, chief operating officer.
Priority reported it processed $140 billion in payment volume on 1.6 million client accounts in its second quarter, ending June 30.
