Global Payments has “a full pipeline” of possible acquisition targets and could do a deal this year, said President and COO Cameron Bready. The Atlanta-based fintech company, which is coming up on a year since closing its USD 21.5bn acquisition of fellow Georgia-based payments company TSYS, is watching the COVID-19 recovery in markets around the world where it is looking at assets, Bready said.
- Vertical expansion and growth in existing areas key strategy
- Europe seen as big opportunity for deals
Global Payments has “a full pipeline” of possible acquisition targets and could do a deal this year, said President and COO Cameron Bready.
The Atlanta-based fintech company, which is coming up on a year since closing its USD 21.5bn acquisition of fellow Georgia-based payments company TSYS, is watching the COVID-19 recovery in markets around the world where it is looking at assets, Bready said.
“We’re involved in a number of different situations that potentially could prove very interesting to us,” he said. “I wouldn’t rule out the possibility of something happening as early as before the end of the year.”
Global Payments, which has a USD 53bn market cap, is better positioned to execute on acquisition opportunities than its peers that might be interested in the same assets, Bready said. The company sits at 2.5x leverage on a net debt basis.
The company is “very focused” on its software-driven payment strategy, Bready said. Global Payments has a history of acquiring independent software vendors in specific verticals, such as its purchases of Advanced MD in healthcare, SICOM Systems in the restaurant and hospitality sector, and Active Network in athletic and outdoors events.
Opportunities to expand to new vertical markets or bolster its position in existing markets are “at the forefront” of the company’s M&A strategy, Bready said, noting it could look to acquire or pursue partnerships. Global Payments is focused on verticals that are highly fragmented from a software standpoint and have a strong nexus between software and payments, he added.
Since it already has a presence in healthcare, restaurants and hospitality, education, and gaming, it could look to acquire independent software vendors in government or real estate, a sector advisor said.
MoffettNathanson analyst Lisa Ellis said Global Payments could pursue broad sector-focused platforms such as Vista Equity Partners-backed Mindbody, which develops software for fitness, wellness and beauty companies, or Lightspeed [TSX:LSPD], a Canadian developer of point-of-sale software.
Eyeing faster-growth markets
Global Payments is also looking at geographic expansion, particularly in faster-growth markets with strong secular trends in digital payment adoption, Bready said. It has a physical presence today in 38 countries, and it conducts business cross border in 100 countries.
The COO said that Europe has a tremendous amount of near- and long-term acquisition opportunities, and he said Asia presented interesting long-term opportunities. Europe is well positioned coming out of the COVID-19 crisis, but certain markets in Asia are struggling more with their recoveries, he added.
Ellis named France’s Worldline [EPA:WLN] and Italy’s Nexi [BIT:NEXI] as potential large payment acquisition targets in Europe for Global Payments.
Worldline is in the process of acquiring payments terminal manufacturer Ingenico [EPA:ING] for EUR 7.8bn. Nexi had been in merger talks with fellow Italian payment systems operator Sia, though the discussions stalled over valuation issues, Milano Finanza reported in June.
Danish fintech group Nets’ financial sponsors are mulling a potential sale of Scandinavia’s largest payments processor, this news service has reported. Nets may be able to fetch a price well above EUR 6bn.
Bready declined to comment on any potential targets, but he said there would not be significant apprehension around a larger acquisition. Any consideration would be driven by the circumstances of the specific opportunity, he added.
Global Payments announced in July an increase in its investment in Spain-based CaixaBank’s [BME:CABK] payments unit to an 80% stake. Bready referred to Spain as an attractive faster-growth market and called the deal an opportunistic acquisition. On the company’s second quarter earnings call, CEO Jeffrey Sloan told equity analysts to look at the announcement as a harbinger of other things that may come.
Bready called M&A a core competency for Global Payments, highlighting the TSYS deal last year and its history of pursuing growth via acquisitions. He said Sloan’s comment was indicative of the company’s “interest in continuing to find ways to use our balance sheet and use our liquidity resources to continue to grow and expand the business.”
COVID-19 accelerates e-commerce
Global Payments could also look at acquisitions to further enhance its e-commerce and omnichannel position, Bready said. The pandemic increased demand for its e-commerce solutions from customers that have historically used its services only for face-to-face payments, he said.
E-commerce makes up about 20% of Global Payments’ overall payments volume and is one of its fastest-growing channels at 16% year-over-year growth in the second quarter. Comparatively, e-commerce at card groups Visa [NYSE:V] and Mastercard make up about twice that volume and are growing almost twice as quickly, according to MoffettNathanson’s Ellis.
Due to the rapid shift to online payments amid the COIVD-19 crisis, Global Payments lost four to five years it could have used to help close that gap, Ellis said. Although there are many directions the company could pursue from an acquisition standpoint, the analyst said its e-commerce strategy should be top priority.