More consolidation may be coming to the US payments industry with Global Payments [NYSE:GPN], First Data [NYSE:FDC] and TSYS [NYSE:TSS] all potential participants, several sector advisors said.
After years of deal making, the three fintech groups are among the largest players in the shrinking pool of traditional payment processing companies that sell electronic payment services to merchants, a service known in the industry as merchant acquiring, and help financial institutions issue cards and handle transactions.
Two major rivals to the companies, Vantiv and Worldpay, completed a merger of equals last year under the Worldpay [NASDAQ:WP] name. The newly merged entity, based in London, has an enterprise value of more than USD 32bn compared to USD 22bn at Global Payments, USD 36bn at First Data and USD 18.5bn at TSYS.
Some of the sector advisors predicted at least one major payments transaction could take place in 2018. Another cautioned that such deals are always hard to pull off and he did not sense much urgency. Most of the players in the industry carry sizable debt loads from past deals and relative valuations have to align between merger partners.
Global Payments, led by former Goldman Sachs partner Jeff Sloan, in particular may be looking at the possibility of a large deal, said some of the sector advisors, who work on sizable payments deals. Options range from an acquisition to a merger of equals to a buyout.
by Yizhu Wang, Jay Antenen and Bhavna Kaul