Contact: Jordan McKee Scott Denne
Global Payments’ $3.8bn pickup of Heartland Payment Systems has far-reaching implications for the payment-processing ecosystem. The combined entity will be firmly situated as a top-five player (by transaction volume) with a strong story to tell around integrated payments in the SMB sector. Market forces including downward margin pressure, technology innovation and heightened competition are guiding the hands of payment processors toward integrated payments, driving deals such as Vantiv’s $1.7bn purchase of Mercury Payment Systems in May 2014.
With an eye to the future, investors and competitors alike should closely monitor the integration process. Mergers in this space have been met with difficulty in the past, and Heartland and Global Payments will be no exception due to disparate distribution models and core processing platforms. A likely outcome could be that both organizations move forward with minimal integration, operating at arm’s length. It will also be important to closely monitor the status of Heartland’s executive team after the transaction closes. Heartland CEO Robert Carr is a thought leader in the payment-processing space and his departure would be a major loss to both organizations.
This is the largest tech acquisition in Global Payments’ history. Prior to today’s deal, the company had printed five purchases since 2012, all for $100-420m, to add online payments, payment software and other tech offerings to its portfolio. In the nine years prior, Global Payments had inked just six transactions, only two of which crested $100m. Global Payments’ reach for Heartland values the business at 19.1x trailing EBITDA – nearly identical to the level the acquirer itself was trading ahead of the announcement.
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