With two payments acquisitions already announced this year, attention has turned to other possible targets, such as Toast, Euronet Worldwide, Marqeta or Lightspeed Commerce.
On Monday, Canadian payments firm Nuvei said it was buying integrated payments player Paya for $1.3 billion, and today Amex said it would buy an Israeli business-to-business player. Although relatively little deal-making occurred in 2022, it’s expected to ramp up this year as company valuations decline in an economic environment that has become more challenging, with less plentiful venture capital.
Aaron Press, research director for IDC Insights’ worldwide payments practice, expects to see a flurry of merger and acquisition activity this year, because there’s “excellent intellectual property out there that some companies will go after.” “There are a lot of companies with really good product and property and technology, but maybe not the greatest business model for the moment,” Press said.
Private equity firms and large incumbents in the space, such as legacy processors and card networks, are among the potential buyers this year, industry analysts said.
“Lower valuations coupled with attractive long-term opportunities will drive continued interest from both strategics and private equity,” analysts with the financial firm William Blair wrote in a note to investor clients this week.
William Blair analysts identified payments services company Euronet, virtual card company Marqeta, payments services provider Payoneer, cross-border firm Remitly, payment acceptance provider Repay and fraud software company Riskified as possible smaller or mid-cap companies that could be targets.
Euronet has the largest market cap of that group, at about $5.15 billion, followed by Marqeta, with a market cap of about $3.66 billion, Remitly at about $1.98 billion and Payoneer at about $1.91 billion. Riskified and Repay have smaller market caps of about $890.34 million and $867.37 million, respectively. Spokespeople for the companies didn’t immediately respond to requests for comment.
Software and payments technology is expected to be of particular interest to buyers. In a note this week to their clients, analysts with Autonomous Research pointed to recent acquisitions of software assets such as Coupa and Billtrust, as well as reports of ACI Worldwide exploring a potential sale.
“We wonder if this puts a floor on valuation for small-cap software providers,” such as nCino, Flywire, Toast and Lightspeed, among others, Autonomous analysts wrote.
Restaurant payments provider Toast is the largest company in that group, with a market cap of about $10.02 billion. Point-of-sale services provider Lightspeed, financial technology company nCino and payments tech business Flywire have market caps of about $3 billion.
A Flywire spokesperson declined to comment, while spokespeople for the other companies didn’t immediately respond to requests for comment.
All of the companies the analysts listed as targets are based in the U.S., except Montreal-based Lightspeed.
Payoneer could be an attractive target for a larger company given its cross-border payments strategy, said Oppenheimer & Co. analyst Dominick Gabriele. He named Global Payments as a potential buyer of a company like Payoneer, “because of the B2B aspect that Payoneer has, and Global Payments is trying to really expand that,” Gabriele said.
Fidelity National Information Services (FIS) and PayPal are other big names that could pursue strategic acquisitions, but Gabriele said he expects companies will “make sure they have their own businesses in check before they go on buying sprees.”
Late last year, FIS announced plans to cut $500 million in costs and has promised a comprehensive review of its operations. PayPal, too, is targeting expense cuts now that activist investor Elliott Investment Management is one of its largest shareholders.
“I think we have a little time before the true valuation hits occur, about six months or so, when all these companies really get to the point where it’s that fire sale,” Gabriele said.