Sunday , February 5, 2023

Processor Consolidation Takes a Big Step With Nuvei’s $1.3 Billion Bid for Paya

Nine days into 2023, the ongoing wave of processor consolidation rolled further with the announcement early Monday that Nuvei Corp. has agreed to acquire Atlanta-based processor Paya Holdings Inc. in a deal valued at $1.3 billion. The transaction would bring to Montreal-based Nuvei a processor with deep roots in payments for municipalities and small businesses and comes just two years after Paya’s move to go public via a merger with a special purpose acquisition company.

The deal positions Paya at a 25% premium to its closing price Friday. Its stock shot up 25% to $9.70 per share during early trading Monday, as GTCR LLC, which holds 34% of Paya’s equity, agreed to tender its shares, according to Dow Jones Newswires. For its part, Nuvei says it will fund the acquisition with a combination of cash on hand, an existing credit facility, and a new $600-million first lien secured credit facility. Bank of Montreal and Royal Bank of Canada have committed to financing Nuvei’s bid.

Nuvei, which was known until October 2018 as Pivotal Payments, projected in October it would report total payments volume of $121 billion for 2022, up 27% over its volume in 2021, a year in which the company reversed several straight years of net losses with $107 million in net income. Its processing volume in the third quarter alone came to $28 billion, up 30% year-over-year. As with processors such as Paysafe Group Holdings Ltd., Shift4 Inc., and other processors, Nuvei has been actively cultivating transactions in sports betting and other facets of legalized gambling.

Paya reported third-quarter volume of $12.6 billion, generating revenue of $71.4 million, with approximately 85% of its volume stemming from card-not-present transactions. Just over one-third of its volume was generated via business-to-business transactions, with the remainder coming from education, health care, and government entities and utilities. It works to distinguish itself as a provider of a single platform for card-based and ACH transactions. ACH alone accounted for 15% of the company’s revenue in the nine months through September.

Paya’s strengths in these markets apparently drew Nuvei’s attention. “The proposed acquisition of Paya is a powerful next step in the evolution of Nuvei, creating a preeminent payment technology provider with strong positions in global e-commerce, integrated payments, and business-to-business,” said Philip Fayer, Nuvei’s chairman and chief executive, in a statement.

The deal, which the parties intend to close by the end of March, follows what has become a familiar pattern for mergers among payments providers, observers say. “There are three key drivers going on,” notes Thad Peterson, an analyst who follows payments at Aite Group. These, he says, include efficiencies from adding processing scale, “value-added services beyond transaction flow,” and the urge to avoid “being trapped by legacy platforms that can’t perform at the same level as newer entrants.”

The deal comes after processor consolidation took on giant proportions in 2019 with the mergers of Fiserv and First Data, FIS and Worldpay, and Global Payments and TSYS. These combinations and the several that have followed–including Global Payments’ $4-billion bid for EVO Payments Inc., which is expected to close by March–increased pressure on players in the market to add scale and expand into new markets.

Check Also

As Sellers’ Fees Rise, Satisfaction With Merchant Service Providers Declines, J.D. Power Finds

Merchant satisfaction with payment processors has dwindled in the past year, as sellers cope with …

Digital Transactions