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Market Killers – The Top 5 Reasons Buyers Won’t Acquire Your ISO

I often write about the attributes of merchant acquiring platforms that create long term value and whet the appetite of companies who seek to acquire the same, but what about looking at your business the other way – what about looking at the attributes of your company that are abject turn-offs to the marketplace, to the point where buyers won’t even consider acquiring you? One could argue this exercise is simply a different pathway to the same information/conclusions, however, I would argue that it’s not. What I’m providing here are single factors – sole attributes – of merchant acquirers’ businesses that can (and do) cause buyers to walk away at first blush. These five reasons that buyers won’t acquire your ISO are true market killers. Read more...

Maximizing Portfolio Value in a Sale: Capitalizing on the Valuation Variance of Downline MLS Portfolios

M&A activity in payments is prodigious, and maximizing portfolio value in a sale has never been more important. Though the heavy level of deal activity in the marketplace is a fairly current phenomenon ( the past 18 months or so), there’s nothing particularly new about trying to maximize the value of the businesses and/or assets we own when we attempt to sell them. In the merchant acquiring space, saleable properties are unique, and their worth is ultimately valued on the basis of “primary attributes” tied directly to the performance of the underlying payments processing portfolio: attrition, revenue concentration, and SIC/MCC distribution for starters. However, in such an active market, where demand is so high, new buyers emerge, and by virtue of their expansion of the marketplace, these new buyers bring new deal structures and the concomitant broadening of those primary attributes which drive portfolio and ISO valuations. Read more...

Portfolio Rationalization

Once upon a time, a merchant was a merchant was a merchant. The putative strategy in merchant acquiring was simple: board as many accounts as possible – big merchants, small merchants, low risk merchants, high risk merchants, and even new LLCs – basically any merchant with a checking account and an “open for business” sign. The rationale for this was straightforward: payments processing – transaction processing – produced real, actualizable revenue that made merchant acquiring a lucrative endeavor. Read more...

ISOs take note: The value of operational expertise is skyrocketing – The Green Sheet 4.26.2017

The value of operational expertise in the ISO world is skyrocketing, taking on new import as the business paradigm for merchant acquiring has transitioned away from transaction processing and toward delivering robust, all-encompassing, technology-based business management solutions for merchants.

As such, the fundamental nature of the ISO’s personnel makeup is changing as well. It’s no longer viable for an ISO to exist purely as a sales platform providing Level 1 support. Because the products and services that ISOs sell today are more expansive and sophisticated, the sales channel, support platform and ability to manage both all require a higher degree of business acumen. Read more...

Why Fintech M&A Doesn’t Happen

It’s an exciting time for mergers and acquisitions (“M&A”) in financial technology (“fintech”). Buyers and sellers abound, the number of transactions continue to pile up, and “fintech” has become a sine qua non in the lexicon of every sentient private equity, venture capital, and strategic investor. Read more...

High Stakes for Agents in 2017: Re-evaluating the Agent vs ISO Question

As the acquiring industry continues to rapidly reinvent itself, birthing a variety of new, technology-centric business models to better service the demands of the modern day merchant, many long time merchant level salespersons (“MLS’s”) and agents are faced with the increased pressure of having to decide how best to position their companies for a successful future. The sheer velocity of this “reinvention” of the acquiring industry has forced many agents to re-evaluate the upside of continuing their agent status versus registering directly with MasterCard and VISA and becoming an ISO. As a “successful future” for a business is oft measured by sustainability, growth, and value creation, 2017 will be a determinative year for many agents who will be forced to reconcile themselves to one or the other of these two pathways forward. Read more...

Payments Processing 101 for ISVs, VARs, & MSPs

I recently had the opportunity to attend a Business Solutions Magazine sponsored conference for ISVs, VARs, and MSPs. Though not an owner/operator of the aforementioned business types, I do have a keen interest in the “goings on” of these businesses. I am a consultant and strategic advisor to payments and payments technology companies, and have been on a self-imposed mission to better understand the ISV, VAR, and MSP points of view on payments. Collectively, these business types have become the new darlings of the payments processing industry in its insatiable thirst to sustain growth (and arguably viability) through the value added products, services, and distribution, which ISVs, VARs, and MSPs bring to bear. Read more...

Payments M&A: The Narrowing Delta Between ISO & Merchant Portfolio Valuations

Throughout the years, an interesting phenomenon related to payments processing portfolio valuations has arisen: the fair market value of a merchant acquiring portfolio has, more often than not, been equal to or greater than the fair market value of the payments processing company, or enterprise itself.  A review of Preston Todd Advisors’ proprietary database reveals that across the spectrum of ISOs with roughly 2,500 to 15,000 MIDs, approximately eight out of ten portfolios displayed this characteristic from 2008 through 2015.
The notion that a merchant portfolio asset can be worth more than the entirety of the company that built it is arguably counterintuitive – it doesn’t seem like that should be the case. After all, it’s human nature to intuit things this way: that a part of something cannot have a greater value than the whole. But when you take a closer look at the cost structure of a traditional ISO, the explanation as to why this phenomenon has historically proven true comes to light. Read more...

Payments M&A: Acquiring the Right Financial Technology

Full version of article originally published in The Green Sheet, 8.9.2016 Edition. Written by Adam T. Hark The future of payments processing is certain. Unless your notion of viability contemplates the continuity of a provincial, mom-and-pop, payments processing company, you are now an official member of the “new order” of merchant acquiring: providing merchants with end-to-end business management solutions or point of sale that also happens to integrate payments. As such, you’re now faced with the challenge of identifying which payments or financial technologies to “hitch your wagon” to. Allow me to share some insight into the rationale that drives this strategic decision and better positions your company for a prosperous future. Read more...

MRI for Your Business? – What a Sell-side Process Can Tell You About Your Company

Original Article Posted to LinkedIn, Authored 7.28.2016 by Adam T. Hark, Managing Director, Preston Todd Advisors Committing yourself, your company, and your employees to a sell-side process can be stressful, distracting, frustrating, and ultimately disappointing if the desired outcome is not achieved – that your company is sold on agreeable business terms. Most owner/operators with quality properties – companies with healthy balance sheets, good EBITDA margins, consistent YOY, double digit top line growth, and interesting, proprietary products and services, especially by way of technologies, find themselves in the advantageous position of not ever having to actually transact, even if that’s their intended objective. These owner/operators always have the option not to sell and pull their property off the market. Thus, for many sellers of quality businesses, the outcome of a formal sell-side process isn’t always an actual sale. Read more...