Global Payments is merging with TSYS for $21.5 billion in a move that is about payments processing software as much as it is acquiring scale in an industry that's consolidating.
The two companies, merging in an all-stock deal of equals, will have a combined net revenue of $8.6 billion with EBITDA of $3.5 billion. The idea is that the combination of Global Payments and TSYS will have a software stack and developers to better compete in omnichannel, e-commerce and digital payments.
Since the deal is all-stock, the combined Global Payments will maintain an investment grade credit rating and balance sheet. By not leveraging up, Global Payments in theory will be able to plow more funds into research and development.
Global Payments and TSYS have 3.5 million mid-sized and small business customers and a network with 1,300 financial institutions. The two companies play in everything from payments to point-of-sale terminals. Jeff Sloan, CEO of Global Payments, will lead the combined company and said that the deal will accelerate its "software-driven payments strategy."
Indeed, the payments market and financial tech is increasingly about software. In January, Fiserv and First Data agreed to merge in a deal worth $22 billion. The combination is aimed at creating a digital banking, account processing, payments, e-commerce and cloud point-of-sale stack. NCR recently picked up JetPay to bolster its point-of-sale unit.
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The Global Payments and TSYS deal has a similar rationale of those previous deals. TSYS said it was the largest third party payment processor, but had stiff competition. In payment processing, TSYS competed with a division of First Data. TSYS' merchant solutions unit competed with Worldpay, Global Payments, Square and Elavon. In its consumer business, TSYS competed with Green Dot, InComm and First Data.
As the payment market morphs--PayPal and Venmo, Apple Pay and Google Pay are just a few of new entrants--incumbents are adjusting to court developers and play in cloud services. In addition, Visa and Mastercard appear to be set to dominate in the new payment era just as they did in the old-world order.
And amid all the payment upheaval, scale will matter. The combined company, which will be known as Global Payments, will process more than 50 billion transactions a year, hit dozens of industries and have 6,000 employees focused on "developing market leading technologies."
If successful, the new Global Payments should be able to cross sell services. Those synergies will be needed to fend off a bevy of companies looking to reinvent payments.
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