3 minute read 12 Nov 2020
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How falling valuations are impacting M&A payments

Authors
Kai Rövenich

EY Parthenon Financial Services Strategy & Operations Senior Consultant

Payments strategy professional. Artificial intelligence enthusiast. Entrepreneurial mindset.

Florian Seeh

Senior Consultant, Strategy, EY-Parthenon GmbH

Payments and FinTech strategist. Entrepreneur at heart. Wants to make the world a better place.

3 minute read 12 Nov 2020
Related topics COVID-19 in financial services Payments Banking and capital markets Financial services
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The COVID-19 pandemic has decreased valuations across the global payments sector, with total deal value falling in Q3.

In brief
  • In Q3, 57 M&A transactions were announced, up from 42 in Q2.
  • Total deal value for Q3 was US$3.1b.
  • The median EBITDA multiple for all disclosed deals year-to-date was 18.3x. 

The pandemic’s impact on M&A activity continues with Q3 2020 deal value in the global payments sector dropping to US$3.1b from US$3.5b last quarter and median EBITDA multiple for all disclosed deals year-to-date down to 18.3x in YTD’2020, from 21.8x in 2019. However, we expect activity to strengthen, as companies pursue synergies and build scale. 

Investment in Spanish payment processor dominates the quarter

Almost two-thirds of this quarter’s total deal value was contributed by one deal – Global Payments’ acquisition of a 29% stake in Comercia Global Payments from CaixaBank for a cash consideration of US$583m. The deal implies a valuation of US$2.0b for 100% of the Spain-based payment processing firm, which provides point-of-sale (POS) terminals, and payment gateways, as well as other POS-based services.

The deal will see CaixaBank maintain a presence and influence in the Spanish merchant acquiring market, while also generating a post-tax US$346.6m capital gain. The current commercial agreement between the Company and CaixaBank will extend until 2040 to facilitate product innovation, business growth, and to meet client expectations.

M&A market development

Also in this quarter, Corsair Capital announced the acquisition of a 100% stake in Multi Service Technology Solutions (MSTS) from World Fuel Services Corporation for US$375m. MSTS is a US-based B2B payment and credit solutions provider specializing in commercial transaction management, facilitating transactions for customers in over 190 countries. The deal will help MSTS capitalize on growth opportunities in the B2B payments market, as well as expand its technology platform and Credit as a Service (CaaS) offering. Corsair Capital said it believes in the tremendous growth potential of MSTS, given the company’s sales growth, customer pipeline, and technology platform, as well as product and geographic diversification opportunities.

In a landmark deal for the African payments sector, Network International acquired a 100% stake in Kenya-based DPO Group from Apis for US$288m.

In a landmark deal for the African payments sector, Network International acquired a 100% stake in Kenya-based DPO Group from Apis for US$288m. DPO Group is a payment service provider of technology to enable businesses and individuals across the continent to make payments online as well as offline across currencies and payment methods. The acquisition will enable the company to broaden its product offering and improve capacity for its merchants to do business in the Middle East and globally. The deal will also develop the capabilities of Dubai-based Network International in Africa across online, mobile, and alternative payments, as well as provide merchant and MNO relationships.

Another decrease in valuations

The pandemic’s impact on valuations continued, with the median EBITDA multiple for all disclosed deals year-to-date decreasing from 21.8x in 2019 to 18.3x in YTD’2020. The median revenue multiple for the same period also decreased from 5.2x to 3.8x.

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Median enterprise value multiples

Deal by region and segment

In Q3 2020, deal targets were based in:

  • North America – 35.1%
  • Europe – 35.1%
  • Asia – 14.0%
  • South America – 8.8%
  • Middle East, Africa (MEA) – 3.5%
  • Australia – 3.5%
Targets by region Q3 2020
Targets by segment Q3 2020

M&A outlook

We expect M&A activity in payments to remain strong, driven by the need to capture synergies and build scale, growth in B2B payments, and the overall increase in demand for contactless payment options given the coronavirus pandemic.

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Summary

While the pandemic continued its negative impact on payments assets valuations in Q3, the quarter hosted some notable transactions. We expect merger and acquisition (M&A) activity to strengthen, as companies pursue synergies and build scale.  

About this article

Authors
Kai Rövenich

EY Parthenon Financial Services Strategy & Operations Senior Consultant

Payments strategy professional. Artificial intelligence enthusiast. Entrepreneurial mindset.

Florian Seeh

Senior Consultant, Strategy, EY-Parthenon GmbH

Payments and FinTech strategist. Entrepreneur at heart. Wants to make the world a better place.

Related topics COVID-19 in financial services Payments Banking and capital markets Financial services
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