Digital Transactions Authoritative, insightful and timely information for payments professionals
When news broke in mid-January that Fiserv Inc. had offered to buy First Data Corp. in an all-stock transaction, we knew instantly we had our cover story. The trouble was, our February issue was already buttoned up, so we knew we’d have to wait for March.
As often happens, this turned out to be a blessing of sorts. The intervening weeks gave us a chance to reach more sources and gather more data as people moved past their immediate shock and began figuring out the transaction’s many angles. In the meantime, we also were able to chronicle the announcement as well as the developing story behind it in our daily newsletter, Digital Transactions News (sign up at our Web site if you’re not receiving it).
What gripped people immediately was the sheer scope of the deal and the fact that the buyer is, of all entities, Fiserv, rather than another merchant processor. Well, as it happens, the $22-billion offering price is pretty big, bigger even than the 2017 deal in which Vantiv Inc. swallowed Britain’s Worldpay, but it’s not necessarily the biggest processor deal of all time.
That distinction may well go to another transaction involving First Data. That was Kohlberg Kravis Roberts & Co.’s $29-billion leveraged buyout of the company in 2007. That price looms even larger today. After 12 years of inflation, it’s more like $36 billion in 2019 dollars.
More interesting than the identity of the buyer and the price, though, is the why of this deal. What source after source told us is that the critical importance of technology, and its dizzying pace of change, is such that payments companies have to find a way to either develop it fast or acquire it—and keep ahead of rivals doing the same thing.
That requires resources that can often come only through acquisitions, sometimes sizable ones. The bigger the deal, after all, the harder it is for competitors to catch up. This is true across a broad front in this business, from point-of-sale systems to integrated payments to peer-to-peer transfers to bill payment to faster payments to cryptocurrency. It embraces new fields like the Internet of Things, cashierless checkouts, and experiential e-commerce.
The result of this tech binge, according to many we talked to, is that we can expect more big mergers, perhaps including some on the scale of Fiserv-First Data. It won’t be easy, and it won’t come cheap, and it will surely reshape the payments landscape. Even if Fiserv-First Data falls apart—it requires regulatory and shareholder approvals—other big transactions are sure to come, probably sooner than later. It’s in the nature of the industry now.
—John Stewart, Editor, john@digitaltransactions.net
