M&A deal of the Month - Verifone is Acquired by Private Equity Firm Francisco Partners

M&A deal of the Month - Verifone is Acquired by Private Equity Firm Francisco Partners

Volker Schloenvoigt
April 30, 2018

We are arguably in the middle of one of the hottest streaks of global M&A activity in payments. So we felt that it makes sense to look at this phenomenon and to select one transaction that was made public over the last few weeks and provide some context on the likely merits of that transaction. Whilst there is naturally a lot of choice and no clear methodology to rank one deal versus another, in this first of our new monthly column Volker Schloenvoigt will look at the acquisition of Verifone by private equity firm Francisco Partners.

In its last fiscal year, Verifone reported total revenues of $1.9bn so the $3.4bn offer from Francisco Partners representing a revenue multiple of approx. 1.8 does not make this an expensive deal by any stretch of imagination. The Verifone share price which traded well below the 2014/2015 figures and which has subsequently seen some lacklustre performance over the last two years jumped by 50% when the proposed deal was announced. So someone clearly thinks there is a lot of merit in that offer.

Verifone is the second largest POS manufacturer globally shipping more than 6m units a year. It provides a range of different terminal solutions such as counter-top terminals, unattended vending machines, mobile/iPad based terminals and it has recently launched Carbon, a smart POS that supports a range of different applications. But it now faces increased competition not just from Ingenico but from a growing list of Asian POS manufacturers that started expanding especially out of China (e.g. Fujian Newland or PAX). Whilst Verifone, and Ingenico for that matter, are not shy of the increased competition both have some time ago decided to pursue a strategy with the aim of expanding their services businesses. Verifone’s services businesses is now the fastest growing segment within the company with a year-on-year growth of 8%. It made strategic acquisitions such as Point in Sweden or Intercard in Germany that contributed a lot to the services business by moving into e-commerce and transaction processing.

Undoubtedly, the merit of this transaction lies in the expected provision of additional funds by the new owners to push Verifone’s move into services even more. It provides Verifone with significant fire power to fill any gaps in their current product portfolio and push into new or complementary businesses. We understand that there is the opportunity for Verifone to solicit other potential bidders for another month but assuming that this particular dealwill indeed close in Q3 this year, we should probably expect Verifone to feature on many bidders’ lists for payment related businesses.

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