Payments keep printing

by Scott Denne, Jordan McKee

Businesses are rethinking the role of payments in their growth strategies, a shift that’s pushing payment providers to print larger deals to meet their customers’ changing requirements. As we recently noted, 2019 saw a surge of big-ticket payment transactions that propped up the deal value total in last year’s tech M&A market. That trend hasn’t slowed this year, as the space has already witnessed two $5bn-plus acquisitions in the past month.

In mid-January, Visa printed its largest-ever tech transaction with the $5.3bn purchase of Plaid, a supplier of payment APIs that should enable Visa to move beyond credit card processing. At the start of February, Worldline reached for Ingenico to add a range of new payment services, leveraging the target’s roots as a point-of-sale (POS) vendor. In addition to being Worldline’s largest deal, it valued the Ingenico at 2.9x trailing revenue, nearly double the 1.6x median for POS providers over the past four years, according to 451 Researchs M&A KnowledgeBase.

Aside from topping the previous high-water marks of their respective acquirers, those transactions (and many of the previous ones in the space) have a shared rationale: Both were done to expand the buyers’ offerings across multiple payment channels, something that has become imperative as payments move beyond the finance and treasury departments. As we noted in 451 Researchs 2020 Trends in Customer Experience & Commerce, several notable companies have made such a change., for instance, moved its payments team within its product group, while Spotify placed its payments unit within its growth-focused business division.

Meanwhile, 77% of businesses say the payments segment has become a highly strategic area. While this change is likely to spur further consolidation, it could also push payment vendors toward acquisitions in related areas such as customer loyalty, customer data management and content management.

Figure 1: Payments M&A

Source: 451 Research’s M&A KnowledgeBase. Includes estimated and disclosed deal values.