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Selling an ISO or Portfolio

Thinking about selling your merchant processing ISO or portfolio? You need to properly prepare yourself, your ISO, and your merchant processing portfolio for the sale. Contacting what you consider to be “obvious” buyers is in most cases doing yourself a disservice. You need to be properly prepared, organized, and informed going into a potential sale to maximize your returns.

I’ve Secured Growth Capital for My Payments Company – How Do I Optimize Investment Monies to Maximize Value?

Merchant acquirers have always caught the attention of investors looking to put capital to work. Recurring, predictable revenue will capture the eye of any sharp investor, and for well over a decade now, investor interest has in no uncertain terms taken root in the

merchant processing space. Consequentially, this has presented a rather steady flow of opportunities for ISO owners, third party processors, agent offices, and merchant level salespersons (“MLSs”). In fact, any level of acquirer who has built a quality merchant portfolio, and owns a piece, if not all, of the residual stream of the same, has the ability to (generally) avail themselves of outside investor capital. This readily available supply and access to capital provides acquirers very real opportunities to grow their businesses, “grease the skids” for long-term value creation, and leverage themselves nicely for further investment or outright exit. 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 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...

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...

Payment Consultant’s Guide to a Successful Acquisition Strategy

Full version of article originally published in The Green Sheet, 6.27.2016 Edition. Written by Adam T. Hark My firm receives over a dozen inquiries every month from parties interested in acquiring merchant processing portfolios. I’m amazed by this level of interest. Why? The merchant acquiring industry is evolving at a blistering rate, pivoting away from the traditional model where the core product and service offering is just payments processing, and hurtling towards a model where comprehensive, end-to-end business management solutions, usually offered as SaaS platforms, rule the day. Let me be blunt: the traditional merchant acquiring model has crossed the event-horizon and is well on its way towards non-viability. As such, when parties approach me about acquiring a card processing portfolio, the first question I always ask them is “why?” I ask this because there is nothing more important in designing a successful portfolio acquisition strategy than clearly understanding the client’s objective with the acquisition, and given that the acquiring industry is undergoing convulsionary change, it stands to reason that past drivers for merchant portfolio acquisitions aren’t necessarily what’s guiding the market activity today. So what’s driving the interest in portfolio acquisitions right now? What strategies are being employed? Let’s take a look at three of the most common scenarios in today’s marketplace. Read more...

How Integrated POS and Infrastructure Technologies Lift Merchant Acquirer Valuations: Connecting the Dots

Full version of article originally published in The Green Sheet, 6.27.2016 Edition. Written by Adam T. Hark Theory has met reality in the merchant acquiring world. It’s no longer just an idea that there’s a ubiquitous convergence of technology and payments processing underway — it’s a fact. Before a merchant acquirer surrenders to this reality, however, and starts investigating which technologies may be worthwhile embracing, whether through acquisition, partnership, or development, it surely makes sense that an acquirer’s first inquiry should be, “what do these new technologies actually do for my platform?” The answer to this question, together with understanding the added value contribution, will pull back the curtain on how these technologies work to lift merchant acquirer valuations. Read more...

Selling Your Merchant Portfolio: Seeking Maximum Valuation

The bankcard industry is rife with legends of merchant portfolios sold at outlandish premiums. However, like most legends, the reality is much different that the industry gossip would have you believe. The majority of portfolio transactions do not sell at a premium. However, there are certain merchant portfolios that trade at much higher multiples than others, and in many cases, the difference in valuation can be substantial. Read more...

“Merchant Portfolio Sales: “Staging” the Portfolio

Members of our firm who contribute to this blog are constantly reinforcing the importance of a handful of merchant portfolio attributes that weigh very heavily into the valuation and saleability of the portfolio asset. Attrition of accounts, CC volume, transactions, and revenue, along with revenue concentration, are prime examples of those particular attributes which figure so prominently into the portfolio valuation and its ability to be sold. And it is surely true, that for many buyers of these properties, certain values in these categories can render the possibility of the merchant portfolio being acquired null. Read more...

“Bankcard ISO For Sale”-What Am I Really Buying?

In one of my meetings at a recent payments industry event I heard the one pronouncement that gets all the attendees frothing at the bit: “merchant processing ISO for sale”. Nothing gets the serial acquirers and investors in the bankcard industry more excited than those words. Buyers inquiring about ISO’s for sale represent > 50% of the inquiries our firm responds to on a monthly basis. Though there’s been much talk in the past few years about the commoditization of payments processing, ISO’s (quality ISO’s that is) are still very much in demand in today’s marketplace by both industry and non-industry acquirers alike. Read more...

Merchant Portfolio Valuations: 2015 Prediction #1 – Multiples Going Down

For those who regularly read this Blog, by now you would be very familiar with the axiomatic truth that the valuation of any asset or enterprise is directly tied to the amount of risk associated with the property, and, whether the nature of that risk is endogenous or exogenous. The greater the risk, the greater the return an investor has to make, and the lower the valuation of the property must be. This principle undergirds the foundation of valuation “science” and cannot be ignored. It is with this principle in mind that I proffer this prediction: non-technology integrated merchant portfolios will experience a downward pressure on valuation in the year 2015. Read more...