Digital Transactions Authoritative, insightful and timely information for payments professionals
Wow, that was fast. Last month, we ran a cover story that reviewed the track record of the three huge processor mergers that all took place within weeks of each other in 2019. With the perspective of more than three years, we thought the time had come to size up the combinations that shook the industry that year—Fiserv and First Data, FIS and Worldpay, and Global Payments and TSYS. But we couldn’t have predicted how soon our headline, “A Mixed Payoff for the Megamergers,” would take on a double meaning.
Within days of that issue hitting the payments industry’s mailboxes, FIS announced its plans to spin off Worldpay within 12 months, effectively undoing the combination it had laid out $43 billion to bring about seemingly yesterday. It was not only the most expensive of the trio of mergers, it was also arguably the most ambitious. It brought to FIS—until 2019 a company concentrating chiefly on services for banks and the credit markets—one of the country’s biggest providers of processing platforms, transforming the Florida company overnight.
Now, it’s over—and talk about a “mixed payoff.” Worldpay will do well as an independent company and is likely in any case to be re-acquired, most likely by an entity that will know what to do with it. As for FIS, the problem—as laid out by the company in a hastily scheduled conference call—was one of capital allocation, the top brass said. The company just couldn’t afford to help its merchant solutions unit grow through further acquisitions, explained chief executive Stephanie Ferris, herself a former Worldpay executive.
So what, many observers may ask, was the point of that enormous merger? Some combinations surely fail to work out as planned, but for one to dissolve as quickly at this one is, to put it mildly, disconcerting. It’s true that, as the deal was structured back in 2019, only 10% of the purchase price for Worldpay was in cash, with the remainder paid in stock. But that still means FIS laid out $4.3 billion in cash, or 45% of the company’s estimated 2022 revenue.
Still, a mixed verdict on this trio of big-time mergers isn’t necessarily bound to yield a bad score overall. Fiserv seems to be thriving on its $22-billion acquisition of First Data, a deal very similar to the FIS-Worldpay combo, if somewhat smaller. Indeed, it’s doing well enough that Fiserv in December rewarded its chairman and CEO, Frank Bisignano, with a five-year contract to continue in that role. Similarly, Global has digested TSYS quite well.
As we said—a mixed verdict. To companies looking to get in this game, think hard.
—John Stewart, Editor john@digitaltransactions.net
