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When Worldpay was separated from Royal Bank of Scotland in the aftermath of the financial crisis, it was only a small part of a minor unit with obsolete technology. largely ignored by its sprawling parent bank.
Less than a decade later, the same company was bought back in the largest acquisition of financial services since the recession, in a $ 43 billion transaction – equal to the entire current market value of RBS.
This change, fueled by the growth of e-commerce and digital payments, is one of the biggest structural changes in financial services since the crisis. It is currently recording record M & A activity as companies struggle to take advantage.
Worldpay is bought by Fidelity National Information Services (FIS) Florida-based financial technology specialist Barely a year after Vantiv's purchase – and his name – in a deal last January, up from £ 9. £ 3 billion.
The FIS provides a range of technologies that help banks and other financial institutions. In payments, the FIS software processes transaction requests from payment networks such as Visa and Mastercard, establishing that funds are available on a valid account, within credit limits, and so on.
Worldpay operates at the opposite end of the payment chain, helping to connect both online retailers and physical retailers to these payment networks.
Worldpay's integration plan was only one-third of the integration project, but FIS President Gary Norcross said it was not time to wait: "It's a sector rapidly evolving that requires you to grasp growth and move towards growth. to have time."
The agreement reached Monday, two months after rivals Fiserv and First Data agreed on a $ 39 billion merger, means that 2019 is already the third year in a row in which a record number of deals been concluded. Since the beginning of the year, 30 deals worth $ 85 billion have been announced, compared with $ 49 billion in 2018, according to Dealogic data.
Analysts and industry experts have stated that they expect the trend to continue, with the latest acquisition putting more pressure on competitors to not be left behind or displaced by new entrants. .
"As expected, 2019 is announcing as a year of consolidation in the financial technology sector and, in particular, in the payments industry," said Stuart Bedford, partner of the law firm Linklaters.
The payments industry was once dominated by traditional banks, but many of them sold. Since then, they have gone from a financial doldrums to one of the most exciting sources of growth, fueling a race to become the world leader.
Financial technology or "fintech" companies, growing from PayPal in the United States to Alipay in China, are preparing to challenge incumbents, reducing their margins by offering faster, cheaper and easier payments use.
Gareth Wilson, Global Payments Manager at Accenture, said, "Market consolidation is expected to continue to allow payment companies to grow globally and address the competitive threat of newcomers to the global marketplace. market".
Darrin Peller, of Wolfe Research, said, "I would not be surprised if we see another deal in merchant payment technology soon." Exchange-traded payment companies that may be applying for a deal include TSYS, Global Payments, Jack Henry and the Netherlands. Adyen based.
Speaking to badysts on Monday, Norcross and Worldpay chief executive, Charles Drucker, both wanted to point out that their merger was not a defensive merger. "This is an offensive agreement and a long-term search for growth," Drucker said.
For FIS, which provides a wide range of services ranging from major banking platforms to badet management software, the agreement offers a way to strengthen the relatively small size of its business, which provides payment services to retailers and retailers. to e-commerce businesses. For Worldpay, the increased presence of FIS in fast-growing markets such as Brazil and India offers an opportunity to accelerate its international expansion.
The combined company expects annual sales growth of about 6% at the end of the transaction and up to 9% in three years, compared to double-digit growth in less developed markets. It anticipates revenue synergies of $ 500 million per year by the end of the third year, as well as additional savings of $ 400 million per year.
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The plans echo previous agreements that involved once-specialized companies that became "one-stop-shops" able to provide more of their customers' payment needs. The e-commerce expert PayPal, for example, has paid $ 2.2 billion to the Swedish group iZettle, which focuses on in-store services. The previous badociation between Vantiv and Worldpay, meanwhile, brought together a company focused on the United States with a dominant rival in Europe.
However, the relatively low premium paid by FIS – about 13% over Worldpay's closing last week – also reflects the slower growth prospects of the two companies' major markets and the need for established companies to reduce their costs.
But this pressure will only add to the momentum of consolidation. An investor said that newly listed companies could also be part of the trading frenzy. The Italian Nexi announced Monday that it was expected to be one of the largest IPOs of the year in Europe, while Network International, based in the United Arab Emirates, is preparing to be listed in London.
A person close to Nexi said: "If you ask me if Nexi will be only Italian in five or ten years, I do not think so.The consolidation is underway and Nexi will be part of it."
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