Past Might be Prologue for Worldline and for Merchant Acquirer Acquisitions

private equity

As 2023 wraps up and a new year dawns, acquirers are targets for acquirers.

Europe has proven to be fertile ground for deal-making (though other markets beckon too).

And while the most recent headlines swirl around Worldline, reportedly in the crosshairs of private equity (PE) interest, there’s a history of buy-ins and buy-outs, and partial acquisitions, that signal reduced stock prices and valuations may be too tempting to ignore.

The continued transformation of payments is a long-run game, we note, that may stoke PE appetite to take these firms into the fold, help retool or refine operations, and do it all without worrying about the vagaries of stock market action.

The acquisitions are not limited to Europe, of course. As reported over the summer, FIS sold its majority stake in Worldpay to private equity group GTCR for $18.5 billion. FIS has retained a 45% stake in Worldpay, enabling cross-selling efforts between the two firms. “This transaction allows FIS to partially monetize our Merchant Solutions business at an attractive valuation and provides certainty for all stakeholders,” FIS CEO and President Stephanie Ferris said at the time. The most recent FIS report detailed a 1% slip in the merchant solution segment’s organic growth rate.

Beyond the Worldline Headlines

Worldline, of course, reduced its organic growth forecasts last month, tied in part to macro headwinds. Consumer spending slowdowns have a marked impact on transaction volumes (and so Wordline shares plunged by more than 50% after earnings were reported). In Worldline’s most recent earnings results, the company spotlighted that merchant services revenues were up 7.6% on an organic basis, as commercial acquiring showed high single-digit growth.

The Worldline news comeson the heels of reports last month that CVC Capital Partners was considering purchasing European payments company Nexi. Nexi’s shares are down roughly 16% year to date. The company said in its most recent earnings report that acquiring volumes grew across all consumption categories and the data illustrate that its merchant solutions business growth, at 5.6% in the third quarter (year over year), outpaced growth rates logged by its other segments.

This fall, British bank Barclays was reportedly mulling the sale of a stake in its unit focused on processing merchant payments, a deal that might value that business at $2.5 billion or more.

And before it rebranded as Thredd, Global Processing Services two years ago raised $300 million from investment firms Advent and Viking Global Investors, giving those PE firms control of the company.

The Shifting Landscape

As noted above, declining stock prices may be drawing PE firms to kick the tires on would-be acquisitions, but there are a number of fundamental shifts in Europe governing payments — through open banking and real-time payments — that demand tech-enabled providers to meet new compliance and omnichannel demands. As more businesses go online and tap new markets, especially digitally, the merchant acquiring is gaining new visibility as merchants need to be connected to  payment networks, streamlining authorization and underwriting activities.