Wednesday , September 30, 2020

Processor Paya Will Go Public Via a So-Called SPAC Merger

Payments provider Paya Inc. today announced a merger with special acquisition merger company (SPAC) FinTech Acquisition Corp III. The merger is being consummated as part of Atlanta-based Paya’s plans to take the company public. Currently, the company is owned by private-equity firm GTCR LLC. 

Because Fintech Acquisition is already a publicly traded SPAC or so-called blank-check company, Paya will not undergo an initial public offering once the deal closes. Instead, the combined entity will assume a new legal name and will re-list under a new ticker on the Nasdaq exchange, the company says. This method for becoming a publicly traded company is often referred to as a SPAC IPO. Typically, SPAC IPOs close within two to three months.  

Paya will use funds already raised by Fintech Acquisition to invest in new products and have funds to acquire other entities down the road, the company says. The enterprise valuation of the merged company is expected to be $1.3 billion.

Hack: “SPACs provide great speed and certainty for access to the public markets.”

“We are excited to partner with FinTech III to accelerate our path to becoming a public company and greatly appreciate GTCR’s continued investment and support,” says Paya chief executive Jeff Hack. “As a publicly listed company, we will continue to invest in the product innovation and support our software partners rely on to meet the needs of their clients, as well as have access to capital for additional strategic acquisitions.”

One advantage of partnering with a SPAC is that SPAC IPOs can assign firm valuations to companies that are uncertain about how their stock would perform in an IPO. That has become more important to companies looking to go public since the Covid-19 pandemic began roiling equity markets in March. 

“SPACs provide great speed and certainty for access to the public markets so we can spend more time serving our clients,” says Hack. “Fintech Acquisition Corp has a great track record in fintech and payments.”

SPACs have become particularly interested in fintech companies in recent years because they have proprietary solutions that offer merchants the flexibility to pivot quickly when it comes to offering new payment options that can help expand their business. 

“If a merchant needs to quickly get an online store up and running (as many have during the Covid pandemic) and a solutions provider has the technology to provide those services, the solutions provider can do well,” says Jared Drieling, director for consulting and market intelligence at Omaha-based consultancy The Strawhecker Group, in an email message. “That’s why vertical-specific integrated solution providers are hot.”

Paya focuses on market segments where electronic payments acceptance is under-penetrated and where it has developed differentiated product and software partnerships. Paya processes more than $30 billion in transactions annually for more than 100,000 customers on its proprietary card and ACH platform, Paya Connect. The company also partners with software providers to deliver payments processing to merchants in such industries as business-to-business goods and services, health care, non-profit and faith-based entities, government and utilities, and education.

“We spent the last few years investing heavily in our technology and talent. With that work behind us, this [move to public ownership] is a natural progression as we continue to execute on our growth plans,” says Hack. “Additionally, the access to capital will allow us to continue pursuing strategic acquisitions.”

GTCR in the summer of 2017 bought Sage Payment Solutions from Sage Group plc for $260 million. In January 2018, the investment house renamed the company Paya.

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