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.



Attrition or retention, however you choose to look at it, is the number one market killer. Any buyer of an acquiring platform, whose most valuable asset is its merchant portfolio, will almost without exception look first at the retention of merchants, and the effects the retention rate has on sales volume and revenue. So if at first glance a buyer sees that your churn rate is high, there’s a good chance that buyer will disqualify your property and move on. That being said, there is one particular data trend that has held over the past 24 months which ought to be fully understood by both buyers and sellers before either contemplates a transaction: account attrition consistently runs higher than sales volume and revenue attrition. This means that it is possible, and I would argue likely, that a merchant acquirer with high account attrition and materially lower sales volume and revenue attrition, ought not to be immediately disqualified. This type of data trend typically indicates that the ISO is losing smaller, non-revenue producing or revenue negative accounts, often to the Squares and Stripes of the world. As such, it’s not necessarily a negative reflection of the property.

High Risk:

If an acquirer has a high percentage of high risk accounts, and continues to board the same, then that acquirer is likely to have a hard time finding a buyer in today’s marketplace. Whether the “high risk” perceived by a would-be buyer is deemed to be regulatory (CFPB), bank related (transactional chargeback percentage higher than 2% (on average)), or reputational (businesses which are deemed to be immoral or unethical), the acquiring property remains a “no touch” acquisition for the majority of the marketplace. Further, even if a buyer would be interested in a predominantly high risk platform, the inherent nature of high risk merchant accounts with exposure to regulatory and/or bank risk, pigeon-holes that property into a low valuation range, which is more often than not, far too hard to overcome to get a deal done.

No Hook:

Run-of-the-mill payments processing platforms – those that market to all types of SMB businesses and compete solely on price and customer service –  lack what I call a “hook”. They don’t possess nor do they offer a differentiator that allows them to successfully sell to specific business verticals or groups of people. The most successful acquirers operating today – defined by high growth and high retention – typically have a hook that allows them to access high value, niche verticals, and hold those merchant accounts, resulting in very high retention rates. Hooks today come in many forms. For many merchant acquirers, hooks come in the form of technology by way of specific business management software. For others, the hook can be the sales channel itself – ISV partners who resell payments are highly sought after today for the combined technology/payments value proposition, which in turn creates a high retention situation. Even culture and language can be an effective hook – there are plenty of ISOs that find themselves locked into specific communities of businesses as a direct result of a shared cultural or linguistic background. The net takeaway here is that without a hook, many buyers won’t have genuine interest in investing in or acquiring your company.


Size is simple and doesn’t require a lot of explanation. Small ISOs, as a function of merchant count, are not highly sought after. There’s minimal, nominal growth, and they require pushing the same amount of paper in a deal as larger ISOs, but without a commensurate payoff. Further, and the primary reason small ISOs don’t attract would-be buyers, is risk concentration. Small ISOs have small merchant portfolios (number of accounts), which have inherently high risk concentration.  As such, for most smaller ISOs, the cost/benefit analysis of the buyer makes it unlikely that they’d be acquired.


Intuitive indeed. No growth = no market interest. If your ISO is running at anemic, flatline, or negative YOY top-line growth, your proverbial goose is cooked. After all, what do you think the primary driver for acquiring your ISO is in the first place? Some might ask then what about bottom line growth? Net income? EBITDA? Well, here’s the thing, when a sophisticated buyer looks at a payments property with flat top-line growth, but decent bottom-line growth, a flag is immediately raised. The buyer is going to rip apart the P&L, looking for an explanation. In most cases, it’s because seller, in preparing their property to go to market, knew they had poor top-line growth and started slashing expenses to pad bottom-line. Now, it could be argued that that in of itself isn’t problematic, but if the expenses that are being slashed are necessary for the continued operation of the business, then this strategy kills any market appeal.

There is one exception to growth as a market killer that’s worthy of note. If your company technically qualifies as a payments processor but its primary product and service offering is technology for certain verticals, growth could be overlooked if, and this is a BIG IF, your technology has the potential to produce a hockey stick shaped top-line trend line for revenue in the next 12 – 18 months. This is not something we frequently see but we have been seeing it more and more these days as more and more ISOs are embracing technology via building it, buying it, or partnering with it.

Adam T. Hark is Managing Director of Preston Todd Advisors. With over a decade of consulting in the payments and financial technology sectors, Adam advises clients on M&A, growth strategy, exits, and business and portfolio valuations. Adam T. Hark can be reached at adam.hark@prestontoddadvisors.com or 617-340-8779.