‘Exciting’ Times For POS Leading To M&A, Partnership Growth

Matt Taylor, CEO of Mercury Payment Systems, noted recently that the payments industry is in “an exciting innovation cycle” at the point of sale. Vantiv’s plans to acquire Mercury illustrates one of the nuances of that cycle, which is a growing trend in the acquiring industry around mergers and partnerships as companies look to fill needs to address the market changes.

As Taylor and Vantiv CEO Charges Drucker noted in a recent interview with Market Platform Dynamics CEO Karen Webster, adding Mercury will help Vantiv fill a strategic hole, which centered on integrated payments. Vantiv earlier acquired Litle, which helped fill a Vantiv need in the eCommerce space.

Integrated payments

Integrated payments was the central focus of several recent deals. Another involved Indisoft, a practice-management software provider for the health care and legal industries, and financial technology provider Bluefin Payment Systems.

Bluefin specializes in integrated cloud-based payment and security solutions for independent software vendors and software-as-a-service (SasS) providers. IndiSoft develops SaaS solutions as well, including RxOffice.

“The RxOffice suite caters to several industries where secure payment processing is particularly important, and partnering with Bluefin provides an integrated payments option with a powerful security solution that protects cardholder data without requiring any fundamental change in how our clients process payments today,” Keith Boyce, IndiSoft vice president of business development, said in the partnership announcement.

Trend Not Unexpected

Other companies similarly are looking to fill their own gaps. Among the most recent deals involved Priority Payment Systems LLC, which on May 28 merged with Cynergy Data LLC. The deal created an independent sales organization that owns a portfolio that exceeds 125,000 merchants conducting over $20 billion in annual credit card transactions diversified across both the First Data and TSYS platforms.

The recent consolidation trend isn’t unexpected, as demand for emerging products and services is building, and the need to react quickly is growing.

Indeed, when asked by PYMNTS.com late last year what to expect for 2014, Peter Osberg, CEO of Snap*, cited greater market collaboration. “We’d like to see all payments-industry participants resolve to better understand how to partner more effectively with other members of the payments value chain to enhance merchant offerings,” he said.

Speed to market is playing a key role in the recent spurt of partnership deals, as companies can gain expertise and access to markets quicker – and not have to show investors a return on any investment, Tim Munto, group executive, sales and client relations at TSYS, said in a recent PYMNTS.com interview.

Speed to market

“Even for an organization the size of TSYS, we no longer have the luxury to go out and buy everything,” he said. “Technology is evolving so quickly, we can partner with best-of-breed providers and get to market quicker and still retain the flexibility in the future so when things shift, we can shift with it.”

Cloud-based processing is one such trend that is growing quickly. Earlier this month, TSYS announced an expansion of its cloud- and tablet-based point-of-sale product offerings through an agreement with ShopKeep POS. The deal gives TSYS another cloud-based product to offer clients without having to make a large investment.

But partnerships work in two directions, with both entities hopefully benefiting. As such, picking the right partner is important. “Our mission is to support small businesses in every way we can, and as part of that we strive to work with the best partners in the business,” Todd Lasher, general manager and vice president of ShopKeep’s channel business, said in the announcement.

Partnerships also are helping companies with the same clients. Square earlier this month, for example, integrated with Stitch Labs, which makes inventory-management software for small merchants. The integration of the two platforms will allow consumers with both Square and Stitch to automatically sync inventory across different channels.

The service is particularly valuable for merchants who manually enter sales made through Square into their inventory-management software. This created anxiety for many merchants, who were never exactly sure whether they were safe selling certain popular goods without real-time certainty about the status of their inventory.

Acquisition route

Sometimes, though, as the Vantiv/Mercury Payment Systems deal illustrates, mergers are the preferred method for collaboration. Another recent industry acquisition involved Global Payments, which in January acquired Payment Processing Inc. (PayPros) to help build its integrated payments technology efforts.

PayPros uses a network of more than 1,000 technology-based enterprise software partners to deliver its products and services to vertical markets that are complementary to the markets served by Accelerated Payment Technologies, Inc., a company Global Payments acquired in 2012.

“Our acquisition of PayPros will expand our direct distribution, add new vertical markets, accelerate growth in our largest geography and further enhance our existing integrated solutions business … ,” Jeffrey S. Sloan, Global Payments CEO, said in the acquisition announcement.

For PayPros, Global Payments’ strong distribution, combined with PayPros’ differentiated service offering, will help accelerate value delivery to its partners and provide opportunities for growth over the long term, said Eddie Myers, PayPros president, in the deal announcement.

Sometimes acquisitions can help to build out an existing strategy. Heartland Payment System Inc., for example, has been getting more and more entrenched in education-based activities through various company acquisitions. It’s latest such deal took place in April, when it acquired MCS software, which provides school food-service point-of-sale, back office and online payment solutions for more than 4,000 K-12 elementary schools nationwide

Through the acquisition, Heartland added both a viable software product to its current platforms and a substantial nationwide customer base. “We also have a significant opportunity to expand and improve upon the school payments solutions offered to parents and children in current MCS school districts,” Michael Lawler, president of Heartland’s Strategic Markets Group, said in the deal announcement.

The recent trend to build out needs among acquirers through partnerships and acquisitions is expected to continue for some time. In some cases, partnerships where companies get to know each other over time will find a full marriage is in their best interest.