an article written by Grant Halverson, CEO McLean Roche Pty Ltd
FIS valued Worldpay at $43 billion in 2019 all share deal….. yet 4 years later, private equity (PE) has valued the business at $18.5 billion, paying just $11.5 billion in cash for a 55% controlling interest. The 2019 deal valued earnings at 24x, this is now 10x, much closer to fin services multiples.
I thought businesses acquisition were all about “creating future value”, seems only PE will get that value, certainly not FIS shareholders!
WSJ Report –
“FIS is a provider of data and technology services to banks and other financial institutions. Its software and services are involved in everyday financial activities, like when consumers check their bank-account balances.”
“Worldpay is among the largest payment processors, helping merchants accept card payments.”
“FIS made a big bet on the merchant-payments market in 2019.”
“Worldpay has suffered from shrinking profit margins and underwhelming revenue growth, challenged by increased competition from other payment-service providers including (Adyen, Amazon, PayPal, Shift4, Stripe) Fiserv’s Clover, Block’s Square, Toast, and all-in-one digital-commerce platforms like Shopify”
“Shifts to online and card-based payments over cash since the pandemic have given a boost to many payment processors, but Worldpay’s growth—particularly with small and midsize businesses, or SMBs—was stunted”
“FIS works with big merchants like Kroger and Walmart, but many of its recent challenges have been with SMBs that have gravitated toward Worldpay’s competitors”
“In February… FIS announced a $17.6 billion noncash goodwill-impairment charge”
FINTECHS
One the real Fintech successes is merchant acquiring – Stripe and Adyen lead the way (Paypal and Amazon are not considered Fintech’s).
Sales growth in 2022 declined, which is a real issue as both Stripe and Adyen go after anyone with an online site.
The competition between this two is heating up as Strip chases an IPO and Adyen wants to match Stripe.
Paypal $1.35 trillion 2022 growth rate 9%
Amazon est only $678 bn 9%
Stripe $817 bn 26%
Adyen $805 bn 49%
Square $204 bn 21%
Shopify $106 bn 24%
Toast $92 bn 61%
Shift4 $72 bn 53%
PAYMENT MEGA DEALS
The dizzy change in payments firms getting much bigger came to an abrupt end in 2021.
Back in 2019, Fiserv acquired First Data $39 bn deal.
FIS acquired Worldpay in 2019 paying US$43 billion, the ‘merger’ that didn’t work.
May 2019 World Payments ‘merges’ with Total Systems (Tsys) $24 bn deal.
2020 Worldline buys Ingenico $8.6 bn deal to then sells it 2022 to Apollo.
The key question: have these firms integrated all these M&A purchases and are they efficient as interest rates and dumb deals bite?
Much more to happen in this space!
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Wall Street Journal article on this topic
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
