In Yet Another ISV Play, GTCR Buys Sage Payment Solutions for $260 Million

Finally, the rumors can stop. Sage Payment Solutions, the U.S. merchant-services arm of Sage Group plc, has been sold to GTCR LLC, a Chicago-based private-equity firm, for $260 million, GTCR announced Friday. Reports of a possible sale of the company, which counts approximately 100,000 merchants in its portfolio, originally surfaced in January.

Sage Group is a United Kingdom-based business-software provider. It entered the U.S. merchant-services industry in 2006 when it bought independent sales organization Verus Financial Management Inc. for $325 million. Now, its exit creates an opportunity for GTCR, long an investor in payments and financial-technology companies, which account for approximately one-fourth of GTCR’s portfolio.

While Sage Payment Solutions is abreast of trends in merchant acquiring, including technology integration and data portability, “it’s a business that could be better,” Collin E. Roche, GTCR managing director, tells Digital Transactions News. “It has some capabilities it doesn’t really bring to market as well as it might.”

In addition to credit and debit card processing, Sage Payment Solutions offers automated clearing house, check, and gift and loyalty card processing services.

GTCR is allocating up to $350 million in equity capital that can be tapped to develop new products, make acquisitions, and otherwise better Sage Payment Solutions. “We’ll reinvest in this business,” Roche says.

As part of the deal, Sage Payment Solutions will be the preferred provider of merchant-processing services to Sage Group customers. This corporate carve out, upon its expected closing in the third quarter, will yield an independent entity more focused on serving the end customer—which uses Sage business and accounting software—instead of a corporate buyer’s plan. “To a degree, Sage felt an independent entity could be more focused on that,” Roche says. Had the buyer been a large payments company, it might have been harder to get that attention for Sage clients.”

The immediate issue before the newly independent Sage Payment Solutions will be growth. “This business had lost a growth imperative,” Roche says. “Now we have an independent business and it’s growth-oriented.”

That growth could come via providing services to software developers. It was one of the first merchant acquirers to actively court independent software vendors, says Peter Michaud, director of project management at The Strawhecker Group, an Omaha, Neb.-based payments consultancy.

“Through Sage Group’s [enterprise resource planning] products and other ISV partners, Sage Payment Solutions is positioned to expand into new ISV verticals and partnerships,” Michaud says in an email to Digital Transactions News. The merchant acquirer also supports the ISO and bank channel.

Strength in integrated payments is a valuable asset lately, as borne out most recently with First Data Corp.’s deal to buy CardConnect Corp., an ISV, for $750 million. “As with recent acquisitions in the payment industry, technology and ISV integration is highly valued,” Michaud says. “The investment commitment in the platform reveals that GTCR sees an opportunity to use technology to drive both revenue growth and operational efficiencies at Sage Payment Solutions.”