Recessionary fears have spread globally in recent months, and it is likely that the trigger fingers for many potential investors within the payments M&A space may be slightly more hesitant than before. Landmark deals, such as the purchases of BillDesk & PayU, by Prosus, are falling through in the late stages – causing some nervous glances. Furthermore, fintech valuations and market caps are falling too. By August this year, the cumulative market capitalisation for fintechs fell by $156Bn. But maybe things are not as bad as they may seem.
Payments analysts regularly post in near-unison about ‘more M&A activity to come and ‘watch this space!’, making special efforts to draw interest toward small and mid-cap companies. Financial services firm William Blair made a point to name-drop the publicly traded Payoneer, Coupa and Repay as companies to keep an eye on.
But whilst this talk of the future may be speculative, 2022 so far has not been without significant M&A activity. Far from it, actually. Worldline spent $4bn acquiring Evo Payments. Bottomline Technologies was bought by a private equity firm for $2.6bn in May, before subsequently acquiring Nexus Systems in August. MoneyGram was purchased for $1.8bn by a US-based PE firm. Worldline is set to acquire 40% of the Netherlands-based Online Payment Platform on top of all the other acquisitions they made over the last 18 months. And now it seems like the purchase of Billtrust is next – for a touted $1.7bn by private equity firm EQT.
BillTrust sits firmly within the B2B payments industry, as a leader in accounts receivable automation. As any half-devoted reader of EDC’s articles may know, the B2B space is one that we feel has been highly underappreciated until quite recently. BillTrust most famously develops technology for I2C (Invoice-to-Cash) procurement within the B2B ecosystem. This ‘niche’ part of B2B payments alone is predicted by Axiom Groupe to be worth a value opportunity of $3bn in 2024, growing at a CAGR of 12% from 2019. A large sum, yes. However in 2021 EDC sized the value of B2B payments to be $150 trillion, growing at a 4% CAGR. So maybe BillTrust’s opportunity is modest after all.
Technologies found within B2B payments have lagged consumer payments for some time now. However, the creature comforts first established in the latter are now filtering through to the former. Some payment firms seek to steer and push this trend to new heights. Invoice payments, in the case of BillTrust, have needed a makeover for some time now. At EDC we regularly see manual processes dominating how business issue and settle invoices, causing payment delays and avoidable knock-on costs for both parties.
BillTrust initially sought to remedy many of the pains within the B2B invoice space. By offering an integrated automation solution, they have built a platform that can layer on top a bank of ancillary services to its clients, from solutions for B2B eCommerce marketplaces to online creditors, BillTrust has made a series of tactical acquisitions to get to this point. In the last two years alone, it has absorbed Order2Cash and iController, two companies that were well positioned to help BillTrust establish a stronger presence in Europe. The latter helped BillTrust broaden their Business Payments Network (BPN), an open network of buyers and suppliers.
With the completion of the acquisition, BillTrust will no longer trade on the NYSE. EQT will no doubt review the strategic initiatives within the payments firm to help it grow and tackle market difficuties. The big challenge for BillTrust, we believe, is proving the necessity and validity of their products to potential clients. Education, in many forms, is a challenge that spans across far and wide across the B2B space.
In summary, yes, there is reason for potential investors to be especially diligent given the market turmoil. But when the right company comes and ticks all the right boxes, as BillTrust has done for EQT, there are still good opportunities to be had and significant deals to be made.