A bundle of billion-dollar-plus payments industry acquisitions this year reflects industry dynamics likely to drive more deals in coming months and into next year, analysts say.

Most recently, the proposed $1.7 billion acquisition of Billtrust by EQT Private Equity last month showed private equity firm financial buyers are still stocked with dry powder capital and on the prowl for payments deals. Billtrust is one of many players that have been carving out a niche in the $100-trillion business-to-business payments arena. 

And it’s not the only deal likely to get done in that attractive and evolving corner of the payments world. Other possible publicly-traded targets in that realm include Coupa, Payoneer and Repay, the financial services firm William Blair said in an Oct. 7 note to investor clients.

In addition to financial buyers, there are strategic acquirers, eager to keep pace with incumbent and fintech rivals, who are also hunting for businesses to absorb. 

“We continue to believe lower valuations, coupled with attractive long-term opportunities, will drive continued interest from both strategics and private equity,” William Blair’s payments analysts, led by Robert Napoli, said in their note last week. “We anticipate more M&A activity, especially for some small or mid-cap names.”

Those targets may also include payments companies in other segments of the industry, such as Atlanta payments processor Paya, or the Seattle remittances business Remitly and Leawood, Kansas point-of-sale and payment services company Euronet.

Other deals pulled off so far this year by financial buyers include Thoma Bravo’s $2.6 billion buyout of Bottomline Technologies and the Madison Dearborn Partners $1.8 billion purchase of MoneyGram. On the strategic side, Global Payments agreed to pay $4 billion to absorb payments acceptance services company Evo Payments.

Some of the companies that have been recently purchased are contributing to the acquisition activity with new capital to make their own acquisitions. For instance, Bottomline Tech bought Nexus Systems last month for a push into the real estate segment.

William Blair’s analysts said in their note that they expect the merger and acquisition appetite to remain strong and play out over the “next few quarters.”

An analyst peer at Baird Equity Research agrees with the general premise that there’s more to come. “With valuations coming down, it makes it more likely for deals to get done,” Baird Analyst David Koning said by email.

The Standard & Poor’s 500 Index has dropped about 18% over the past year, causing a decline in private company valuations as well.

“The fast-growth companies have come down significantly from IPO prices and recent highs, while legacy companies remain at low valuations,” Koning said. “It seems like consolidation will continue.”

By Lynne Marek on Oct 11, 2022
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