3 minute read 13 Sep 2021

While deal numbers remain low, more early-stage investment highlights the ongoing attraction of new payments platforms.

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Why M&A in innovative payments companies is expected to soar

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.

Contributors
3 minute read 13 Sep 2021

While deal numbers remain low, more early-stage investment highlights the ongoing attraction of new payments platforms.

In brief
  • Payments deals increased slightly from last quarter – 58 in Q2 compared with 47 in Q2.
  • Median valuation figures are down but based on only a small number of disclosed valuations. We believe valuations remain strong.
  • Convergence between verticalized software and payment propositions is one trend expected to drive M&A in the remainder of 2021.

M&A activity and deal characteristics

Q2 at a glance:

  • There were 58 M&A transactions announced.
  • There were 19 transactions with financial terms disclosed.
  • The total deal value was US$7.9b.
M&A market development
Large US deals dominate transactions

Three large deals targeting US-based companies made up much of Q2’s total M&A deal value within payments. The biggest of these was the May 2021 acquisition of Divvy Pay, Inc, a payment and business budgeting platform, by global cloud-based software service provider, Bill.com Holdings, Inc. The US$2.5b transaction will support Bill.com to centralize its financial operations and achieve ambitions to generate an additional US$100m of annual revenue.

Also in May was the US$2.2b deal by Advent International Corporation, a US-based global private equity (PE) firm along with Eurazeo, a French-based PE and VC firm, to buy Planet Payment, Inc. Planet, an international payment and transaction processing service provider. They will use the investment to develop innovative and diversified payment solutions.

In June 2021, US-based technology solutions provider, Deluxe Corporation, acquired US-based online merchant processing service provider, FAPS Holdings Inc, in a US$960m deal. This deal enables Deluxe to double its annual revenue to US$600m and improve its competitive positioning as a merchant service provider.

Valuations figures don’t tell the real story

With only a small number of payments deals with disclosed financials, the data around valuations are unlikely to reflect the true state of the market. Figures show that the median EBITDA multiple for all disclosed deals year-to-date decreased to 6.6x in 20211 from 18.3x in 2020. The median revenue multiple for the same period also decreased from 3.8x in 2020 to 1.7x in 2021. However, we believe that, despite these figures, valuations within the payments segment have not declined.

Median enterprise value multiples
With only a small number of payments deals with disclosed financials, the data around valuations are unlikely to reflect the true state of the market.
Kai Rövenich
EY Parthenon Financial Services Strategy & Operations Senior Consultant
Deal by region and segment

In Q2 2021, deal targets were based in:

  • North America – 39.7%
  • Europe – 24.1%
  • Asia – 19.0%
  • South America – 8.6%
  • Middle East, Africa (MEA) – 6.9%
Targets by region Q2 2021
Targets by segment Q2 2021
M&A outlook

We expect deal volume and value to increase throughout the industry as record-level valuations driven by ample liquidity are reinvested to quickly increase size and scale. We also expect to see more convergence of verticalized software and payment propositions, with more deals aligned to this rationale.

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Summary

Payments companies using innovation to reshape the market attracted significant M&A this quarter, in a trend where deal facts and figures don’t tell the full story. With ample liquidity looking for targets, expect investment in this growing segment to stay strong in 2021 and beyond.

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.

Contributors