by Scott Denne
Amid a wave of consolidation, payment providers are commanding a premium. Long-standing companies in that market are fending off a laundry list of changes, driving larger deals and a willingness to pay up. In less than a week, two acquisitions have printed with revenue multiples that are more than a full turn above where a typical payments vendor trades.
The expansion of digital wallets and P2P payment networks, advancements in integrating payments into software, mobile point-of-sale apps, and the continuing march of digital commerce (and mobile commerce within that) are all reshaping the payments industry. For example, global digital commerce is expected to crest above $6 trillion by 2022, more than double last year’s total, according to 451 Research’s Global Digital Commerce Forecast. Many players in the industry are combining to cope.
With today’s announcement that Global Payments will use $21.2bn of its stock to buy TSYS, there has now been $82bn in purchases of payment providers this year. Put another way, $4 of every $10 spent on a tech target this year has gone to a payments company, according to 451 Research‘s M&A KnowledgeBase. While this year’s total is a high point, the trend has been building for some time. Each of the two previous years also saw more than $10bn spent on payment targets, something that’s only happened in one other year since 2008.
To get its hands on its rival TSYS, Global Payments valued the business at 6.1x trailing revenue, well above the median 4x for payment companies across the entire decade, according to the M&A KnowledgeBase. Nuvei paid a similar multiple when it handed over $890m for SafeCharge last week to move into European markets. Those transactions helped propel the median multiple for payment deals up to 5.7x for 2019, according to our data. As the number of potential targets with scale shrinks, payments are looking pricey.