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With the payments industry abuzz since late Thursday with reports that the big processor Shift4 Payments Inc. is in talks to be acquired by Global Payments Inc.—reports Global Payments has denied— questions are emerging as to whether Shift4’s plans to grow through the exploration of strategic initiatives include a sale.
News of talks between Global Payments and Shift4 first broke in reports from Bloomberg News late Thursday. A few hours later, Reuters reported Global Payments denied it was in talks to acquire Shift4.
The buzz about a Shift4 sale has been stoked in part by a letter to shareholders from Shift4 chairman and chief executive Jared Isaacman. The letter concludes with an acknowledgment that, while Shift4 feels it has been running hard and performing well, the stock market has not been good to fintechs in recent years. As a result, the company will actively explore “strategic opportunities and alternatives that will reduce distractions and serve our company, employees, and shareholders best,” Isaacman says in the letter.
Reached by Digital Transactions News, Shift4, which released its third-quarter 2023 earnings last month, declined to comment on its plans beyond what was stated in the shareholder letter.
While an acquisition of Shift4 by Global Payments would be a big boost for Global Payments, such a deal would come with some risk, says Cliff Gray, a senior analyst at payment consultancy TSG. Since Shift4 has built its business in part by being acquirer-agnostic, if Shift4 were to lose that autonomy through an acquisition, the move could cost the prospective parent company some of Shift4’s clients.
“Shift4 has built a great business and would be a great buy for anyone,” Gray says. “But it doesn’t make sense for Global Payments to allow Shift4 to remain acquirer-agnostic, because Global would want to be the acquirer for Shift4’s portfolio. If that became the case, there is a possibility that some Shift4 clients would move on.”
Gray raises the question as to whether Shift4 is actually looking to find a partner to become a back-end processor, in the manner of Stripe Inc. “That side of the business is what gets investors excited because it is a safe, consistent revenue stream,” Gray says. “More and more [fintechs] are doing processing themselves.”
Another possibility behind Shift4’s decision to explore strategic initiates, Gray adds, is that the company may feel the stock market has undervalued its core business. The company is strong in the stadium, restaurant, and hospitality markets. “Shift4 has a great reputation and depth and breadth of product, but the market seems to underestimate the value of Shift4’s base product,” Gray says.
