Digital Transactions Authoritative, insightful and timely information for payments professionals
The growing interest of private-equity firms in merchant processors showed itself again Wednesday when the big independent sales organization Mercury Payment Systems Inc. disclosed that Silver Lake would take a 60% interest in the company. Meanwhile, private-equity executives were out in force at the Electronic Transactions Association annual meeting in Las Vegas, which ended Thursday. Henry Helgeson, president of the Boston-based ISO Merchant Warehouse, says he collected about a dozen cards from private-equity representatives, and he guesses many more were prowling the exhibit hall. “We needed a fly swatter to keep them away,” he quips. Neither Mercury nor Silver Lake would reveal other financial terms, but the rumor that Silver Lake was paying a very good multiple on earnings was the talk of the ETA show on Thursday. A Mercury spokesperson tells Digital Transactions News that Mercury sought a partner to keep growing. “The company has grown really rapidly in the past few years and we're at a point where we want to get bigger,” the spokesperson says. “The investment will help us get there.” The founders of Durango, Colo.-based Mercury, Marc Katz and Jeffrey Katz, along with existing investor Larry Stone will retain approximately 40% of the company. Chief executive Matt Taylor will continue in his current post. Silver Lake, which has offices in California's Silicon Valley and New York City as well as overseas, invests in technology and related companies. “In less than a decade, Mercury has evolved from a startup to the clear leader in integrated payments,” managing director Mike Bingle said in a news release. Mercury, one of the five largest non-bank merchant acquirers with 487 million transactions last year, up 44% from 2008, has made a name for itself through integrated processing of credit, debit, and gift card payments and loyalty programs. Besides a host of services supporting point-of-sale and e-commerce transactions, it has specialty services for pharmacies to support debit payments from Health Savings Accounts and Flexible Spending Accounts. One reason Mercury may have gotten a good sale price was that in addition to its strong product lineup, it avoided giving away terminals as some other ISOs have, a strategy that can hurt margins, Christopher Justice, North America president of terminal maker Ingenico SA, tells Digital Transactions News. “Mercury is a phenomenal company,” he says. “They have done an outstanding job of differentiating themselves.” Private-equity firms are attracted to merchant acquirers for their growth prospects and recurring revenue streams. In two recent deals, The ComVest Group bought Cynergy Data in a bankruptcy court auction and Advent International took a 51% stake in Fifth Third Processing Solutions, the acquiring arm of Fifth Third Bancorp (Digital Transactions News, Nov. 2, 2009, and March 30, 2009).
