Payment processing companies Vantiv and Worldpay have agreed to merge in a deal which values the British business at £9.1 billion including debt. The news comes after the company announced it had received competing bids from both JP Morgan and Vantiv earlier this week.
Investments in European software companies have come under the microscope recently. Yet while PE deals are rising substantially, corporate acquirers—particularly from abroad—seem intent on spending more on fewer deals. Examples of investments in payments companies illustrate this trend. Last year, Visa completed its mammoth €16.5 billion takeover of Visa Europe, while earlier in 2017, MasterCard acquired VocaLink for around £700 million.
The piqued interest in digital payments comes as financial services companies are facing a number of threats against their traditional models. As well as rising regulatory burdens, banks and other financial service providers are having to deal with changing consumer preferences, fintech innovations and new, faster-moving competitors.
For financial investors, this presents an opportunity to back many of the emerging payments disruptors, such as Klarna, the Swedish company which recently received a European banking licence. Yet for companies looking to make a living in the space, the hindrances encourage businesses to combine.
In the joint announcement, Vantiv and Worldpay noted speculation about consolidation in the sector and said the deal would provide ‘substantial’ cost synergies.