M&A deal of the month: Heidelpay acquires Paysafe’s Pay Later business

M&A deal of the month: Heidelpay acquires Paysafe’s Pay Later business

Volker Schloenvoigt
July 31, 2020
Heidelpay continues its acquisition path to turn itself from a PSP focussing on online commerce to a truly omnichannel provider of acquiring services

Heidelpay has hit the market again. Another acquisition to enhance its range of capabilities undoubtedly strengthens its position as an omnichannel player in the acquiring space. In order to emphasise the impressive growth of Heidelpay, let’s rewind the clock to 2016 when the journey began.

Heidelpay was looking for an external investor and after a competitive bidding process, AnaCap Financial Partners acquired a controlling stake for an undisclosed amount. Industry experts believed that the company was valued upwards of €100m at the time. Although it positioned itself as an omnichannel provider in 2016 already, Heidelpay’s focus was on e-commerce. A PSP that leveraged its Payment Institution license for collecting activities, used its proprietary technology platform and had a good range of value-added services (including invoice and debtor management); all in support of 4,000-5,000 merchants. With the additional financial muscle of an outside investor, 8 companies were acquired over the course of 18 months. Some of those provided a necessary geographical expansion (e.g. into Austria), others brought in some additional payment method capabilities, but the majority were smaller sized businesses specialising in the provision of terminal equipment and maintenance to physical merchants. By now, over 50% of its merchant base originated in the offline world.

Heidelpay had now become a truly omnichannel provider servicing its merchant base in both online and offline channels. In 2019, most of Heidelpay’s key financial metrics had increased by a factor of 9-10 when compared to 2016. AnaCap sold the business to KKR, another private equity investor, at an assumed company valuation of €800m. Despite all the acquisitions, there was clearly a good return on its original investment for AnaCap.

The most recent acquisition of Paysafe’s Pay Later division enhances its capabilities further. The business unit that previously operated under the name Payolution, provides white-label invoice and instalment payment solutions for online merchants and brick-and-mortar retailers, such as Decathlon, Teufel and Schuhcenter.de. This acquisition is fully in line with one of the major trends we are seeing in the acquiring industry. The provision of lending facilities to merchants or cardholders and the increasing relevance of pay later products. Heidelpay had some capabilities in this space already but this acquisition significantly strengthens its footprint. It is a very competitive space though. In many ways, Swedish Klarna is one of the most well-known examples, but even before its market entry into Germany, there was a range of different players servicing customers that were not seeing credit cards as one of the leading payment methods for online payments. However, the integration of such alternative payment method by one of the larger PSPs in the DACH region will considerably strengthen its appeal to merchants. With the additional scale comes data that is helpful for data analytics and risk management purposes. It is also another service that can be monetised and reduces the reliance on transaction fees. For sure, Heidelpay is well-positioned in its home market now.

We don’t know what the next acquisition for Heidelpay will be – assuming there will be more – but it will be interesting to see whether the ambition will be to enhance its position in Germany further or whether Heidelpay feels that it is time for a wider European presence and an aggressive push into other markets.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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