Glenbrook partners Bryan Derman, Chris Uriarte, and Simon Skinner jump on a Fanning the Flames episode of Payments on Fire to give a first take on the  Global Payments acquisition of Worldpay. Tune in to hear their strategic perspective on the deal.

 

 

Bryan Derman: Hello payments people. This is Bryan Derman, a partner at Glenbrook bringing you our first take, Fanning the Flames on the Global Payments acquisition of Worldpay. Just to repeat the background, we actually have a pair of interesting transactions involved here between Global Payments, Worldpay and FIS.

Biggest part of the deal, Global Payments is acquiring one hundred percent of Worldpay for approximately $24 billion, acquiring it from its current majority owner, GTCR, as well as its minority owner, FIS. At the same time, Global Payments is going to be selling its issuer solutions business, a business they bought several years ago when they acquired TSYS, they’re going to sell that business to FIS at a price of 13 and a half billion, so kind of a swap of issuer and acquiring businesses going on here.

And the principles have disclosed that they think it could take up to a year for this deal to clear all its regulatory approvals and reach closing. So we will be talking about and thinking about and watching this one for quite a while, and we’ll see what the twists and turns are. So to give you our fast take, at least from a strategic perspective, it seems like there are some things to like in this deal, in particularly that it allows each of the players involved to, if you like, do what they do best.

It takes Global Payments back to its roots as a tightly focused merchant services player, processor, acquirer, and by virtue of incorporating Worldpay, they will obtain some new and enhanced capabilities and some broadened market presence around the world. For its part, FIS really comes back to its roots as a bank-oriented provider of a suite of offerings and brings into that an industry leading credit card issuing platform to compliment the many other services that it sells to the banking community.

So, as I said, in the ideal state, if this all works out well, each side should get better at what they really do at their core activities. And unlike in some earlier deals, I think you can really envision realistic synergies for each of these companies on both the expense and revenue sides.

I’m joined today by my partners, Chris Uriarte and Simon Skinner. Welcome, guys. Good to have you on the pod.

Chris Uriarte: Hey, Brian, how are you?

Bryan Derman: Really good.

Simon Skinner: Good to be joining you today.

Bryan Derman: Good to have you here. So let’s start our discussion talking about the global side, the merchant acquiring side of this.

What do you guys, how do you view the look of the pro forma combined company, a combined Global Payments and Worldpay and what kind of useful changes could that bring?

Chris Uriarte: I mean, certainly Brian, I think the point that you made earlier, this was a little bit of a, what do you want to be when you grow up type exercise, I think, for both of these companies, although they’re a little bit too old now, maybe most of them, maybe to make that decision. But here we are and I think it’s probably a good thing.

And I think on the Global Payments side, the focus most certainly, focus on acquiring, focus on merchants is definitely going to help them from a number of different angles. Obviously you have two major players that are being combined from an acquiring perspective, so scale is absolutely critical to this deal here. We should see things like better economics all around and just in their capabilities, their reach will be absolutely tremendous. I saw a statistic today that when you look at the two of these players, they’re out there servicing merchants in over 170 different countries across the globe. So the reach is really absolutely critical.

Bryan Derman: I don’t know what happens to the league tables, but when you add up the volumes that these two process, you’re going to be right at the top of the table, I think. At or near the top.

Chris Uriarte: Yeah. Yeah, for sure. And I think the other thing that you see in the characteristics of both of these companies is you now really have an organization that is going to be able to service really every little corner of the market from the smallest in the merchants to the largest of the big box retailers in e-commerce environment, in a card present, in-store environment here.

These are obviously organizations that have deep rooted decades worth of experience servicing many different types of merchants in many different business lines with different business models. That, in itself, I think is going to be interesting. Question will be, will they be able to articulate, I guess is the word, the product offering across that spectrum such that it’s focused in the right way to those different players across the spectrum. But I guess we’ll see, there’s a lot of work to be done from a product positioning, product marketing, and m-architecture side of things as they continue to mature for sure.

Simon Skinner: So you mentioned there the combined entity being able to serve all pockets of the market. I think one area where that’s super relevant and interesting is in that ISV and payfac space. So I think Global, probably quite well positioned in that a few years ago with the referral deals that it had set up with various software platforms, but perhaps it lagged others in the market in terms of moving up the value chain to offer managed payfac and registered payfac solutions.

Whereas Worldpay, really strong in that space and has been for many years, and so the combination really bolsters the aggregate or global kind of position in that space. And Worldpay’s acquisition of Payrix only further bolsters their capabilities in that payfac as a service offering.

So I think the combined entity, as you suggest, has broader reach than the individual parts.

Chris Uriarte: Yeah, I would agree with that, Simon. And I would also say that that area in particular, I think that’s a great one to bring up. We here at Glenbrook have continued to see just incredible growth in the ISV, in the payfac space, the managed payfac space or whatever flavor it sort of manifests itself as out there in the market. We know there’s a lot of different models that are out there. We continue to see significant growth there. These software platforms looking to continue to grow and monetize payments on the platform. So certainly think that there is a really good opportunity there for them to leverage the history of both these organizations in this space.

I think one of the challenges though that probably sticks out to a lot of people here is while there most certainly is a lot of room for cost synergies, we know that there are many, many platforms that exist within this portfolio here. We know that Global has not necessarily been, I’ll just say, not been great at maybe acquiring and integrating a lot of these companies from a platform perspective, from a branding perspective, from a market facing perspective. And there’s often been some confusion around some of their offerings out there into the market today.

Worldpay has made a lot of positive movement in my opinion over the years to do things like consolidate platforms and bring global clients onto as many global platforms as possible.

But let’s not fool ourselves in saying that. This is most certainly going to be a very, very complex exercise when it comes to figuring out how to sunset some of these legacy platforms and how to consolidate clients and technology into the platforms that makes sense from a strategic platform perspective moving forward.

Bryan Derman: I think the transition here will be an interesting one for the combined company to navigate because they will be out in the market for let’s call it a year without really being able to deliver certainty about which platforms are the, go forward. Solutions, which ones could be at risk?

I think about our merchant clients and, the vendor selection processes we run. This issue’s going to come up. Interesting to see how they handle it. Who do we send the RFP to? I guess it’ll be both. We’ve been here before. We’ll figure out what to do.

Chris Uriarte: We’ve been here before. And Bryan, I want to stress something that was mentioned today in the announcements is, this deal is not set to close until, their prediction is this deal will close at the end of first half of 2026. We’re more than a year away from this deal closing.

Then the integration activities really have to start there. So, realistically, we’re probably not going to see synergies happen from this deal for many years. Although, to your point, Bryan, maybe after the deal is closed, at that point, management is going to have an idea as to what platforms are probably a little bit more strategic than others, but we might be in limbo for the next year, year and a half.

Bryan Derman: Yeah. I think that will be tricky. There are a remarkable number of moving parts, I guess you could call it, but also interesting assets buried within these two companies. I started to think about this is not exactly the first merger or acquisition deal that either of these companies has been involved in. I think we could just round robin it here and generate a pretty interesting list of all the once very notable payment companies that are buried inside either Global or Worldpay. We say Worldpay, but, I’ll go first. Inside of Worldpay for many years now has been Vantiv, which in many respects, the leading acquirer in the US for the big box retailers. Many of the physical point of sale household names were and still are Vantiv slash World Pay slash Global clients.

Chris Uriarte: And I think if you look inside Vantiv as well, you’ll find Litle as well, Litle and Company, Tim and Tom Litle. I think they were great innovators in the e-commerce space from a payments perspective. And that was a good acquisition for Vantiv. That’s still somehow buried in there somewhere.

I have this mental image of those little Russian nesting dolls. If you just keep opening one up, you find another deeper and deeper in there in this situation.

Bryan Derman: Yeah.

Simon Skinner: Shall I throw another one into the mix? Cayan. I think, the genius POS system is still probably referenced out in the market.

Bryan Derman: Yeah. That was a very notable deal when, I think, TSYS bought that as part of their entry strategy into the merchant side of things. Back on the Worldpay side, I may be wrong here, but I want to say before there was Worldpay, as my friends at NatWest moved into the e-commerce space, there was Bibit, a big player in European e-commerce back in the day. In some ways, I think people used to say it was the PayPal of Europe.

Chris Uriarte: Yeah, yeah. We also had in Europe, Simon, of course we had Streamline as well. That was embedded in there too.

Simon Skinner: Yeah.

Bryan Derman: We’ll come back to that one.

Chris Uriarte: Well, the big one on the global side, of course, is Heartland Payments, right? So that’s another one that’s in there.

Bryan Derman: Yeah, gigantic restaurant portfolio. And going way back, Mercury Payments, which is, in some ways, I think of as the boat that started the wave on integrated payments and thinking about how acquirers needed to relate to software companies, which of course has been the massive mega trend that we’ve been following ever since.

Chris Uriarte: Yeah, for sure.

Bryan Derman: Well, Worldpay has certainly been an M&A saga. I remember not that many years ago being pretty optimistic about the original merger, Worldpay and Vantiv, and how it brought together a big US player with a big European player; a big store based, enterprise player with a big e-commerce player.

The problem there was before much could happen, that combined entity, to me, before it could realize its potential got acquired by FIS. And I think it’s fair to say that that deal did not go very well. Merchant services did not really become a core business for FIS, and with this deal, I think they will be essentially out of it.

There are some partnership arrangements by which they will still sell merchant services, but in terms of a meaningful business portfolio, I think this calls to an end of FIS’s foray into the merchant business and maybe that’s as it should be. I think with these two companies moving to more of a pure play status, I feel a little more optimistic about things. But certainly on the global side, the leadership team there has a very big and somewhat complex ship that they will be trying to steer.

Chris Uriarte: Yeah.

Bryan Derman: Any thoughts there? Are you guys optimistic?

Chris Uriarte: Yeah, I am. I think obviously this all comes down to execution and the timeline here is going to be pretty long, right, until we start to see synergies most definitely. What I will say is I have been looking at Worldpay pretty closely over the course of the last year since the divestiture and I do like the direction that they’ve been heading.

I feel like there’s been a lot more focus in that business. I feel like they’re articulating their capabilities and who they serve and how they can serve them in a better fashion than they ever have. I think they’ve had a pretty positive momentum since the spin out. My hope is that the integration and whatever is going that they’re going to find a way to recognize the synergies and capitalize on that momentum.

It seems to me that the capabilities, the size, et cetera means that Worldpay will probably be the flagship, if you will, platform for Global moving forward, the platform that they could hang their hat on. But back to what we talked about earlier, the challenges in integrating these, in sunsetting legacy platforms and moving merchants, et cetera, is not trivial at all.

Bryan Derman: There will definitely be a best of breed exercise. I think the old Cayan platform, which they call the genius POS these days, that looks like a survivor. I think that’s their play against, some of the integrated POS providers, whether you think of Toast or Shift4 or Square or probably most directly Fiserv with Clover.

Chris Uriarte: Yeah.

Bryan Derman: To make hay in the SMB space, they’re going to have to have solid offering to put against that.

Chris Uriarte: Yep.

Simon Skinner: It looks like there’s plenty to feel optimistic about in the combined entity. I think as always, the watch word is integration and ensuring that as they go through that journey, it doesn’t become a distraction for the management team for all the great stuff that they’ve been doing recently in their collective camps. As ever with a deal of this nature, of this size, the execution will be key.

Bryan Derman: Never without risk in a deal of this size. Let’s cut over and talk about the FIS side of the transaction which, to me, feels like the more straightforward, right? FIS moves itself out of the merchant business and, to me, becomes a much more tightly focused, bank-oriented provider. Very broad suite of products that the banking community can benefit from.

And it now takes on the issuer solutions, the old TSYS platform, which is a very highly regarded credit card processing platform, and that should slide very nicely into the remaining suite of products. It’s a business that FIS was already in. But you would probably view this as a meaningful upgrade in terms of the quality and capability of the system that they will be able to deliver to banks. And I also think in some respects, FIS adds a lot of value to that platform. It’s a well-regarded platform, but one of the gaps it had was it only did credit, it did not really have a companion debit processing platform.

And of course, FIS has that, and for many years has supported large number of banks with their debit card processing, and they complement it, as many debit processors do, but by owning a large national debit network in the form of NYCE. So it really feels like the whole card management suite comes together here in credit card, debit card, and debit network.

I look at FIS and say that this looks like an increasingly solid bank processor. Very much competitive parity, you would probably say with its main competitor, Fiserv, who brings all of those things and also remains in the merchant business. But in terms of the bank processors, the big two remain the big two here.

Chris Uriarte: I would agree with that. I think it’s also a situation where you have, it’s a little bit easier of a situation in that very often you see, particularly with midsize and larger banks, different systems that are being run from a credit issuing perspective, a debit perspective, a core banking perspective, et cetera.

So bringing along the TSYS platforms to complement the existing FIS platforms seems like it might be a little easier for them to ease into a broad suite of solutions that they could sell across the board to their respective customers as opposed to what we described on the global payment side, the merchant side, this activity of trying to actually move everybody from multiple platforms onto one or two strategic platforms, is a little bit different of an exercise here.

Bryan Derman: I don’t think you’d be looking at any platform consolidation on the FIS. You want to bring them together and have some commonality, but we’re not really talking about sunsetting much of anything. I guess we’ll have to see what FIS might do with its legacy credit card platform. That might be the only candidate for consolidation, if you will.

So, Chris, a couple of moments ago, you brought up a brand name that I haven’t heard in many, many years in terms of Streamline, the old domestic UK really point of sale oriented acquiring business that once upon a time was a piece of NatWest and then RBS and finally folded into Worldpay, but it still sits there with a very high market share, very large portfolio of classic SMBs, UK High Street retail shops, who pay attractive prices for acquiring services. Maybe not the most dynamic piece of the acquiring business, but maybe a classic cash cow sort of business.

But all of that relates to another deal that happened this week that’s probably been a bit overshadowed here, but we saw Barclays Bank in the UK begin to address the uncertainty that’s been hovering over its acquiring business. And Simon, I know you’ve been digging into that one a bit as a Barclays alum. What’s your take on the deal that was done this week?

Simon Skinner: Yeah. Yeah. It’s interesting for sure. I think at its core is that question of whether there really is strategic benefit of holding a fully-fledged payment acceptance business within a commercial bank and having the pockets deep enough to continually reinvest and enhance the platform and the proposition especially in a multichannel world where there’s increasing global competitors. And we’ve seen the inside the tent, outside the tent flip, not just in the UK, but in other markets. You mentioned Streamline as one example.

The announcement today that Barclays have entered into that strategic partnership is the next step on their journey of essentially stepping back from holding that traditional merchant acquiring business in-house. What I think is interesting and we might pause on for a minute, is the journey that they’ve been on, and I’ll use the recent past rather than the full journey.

But when they started talking about divesting this business back in 2023 as part of a broader strategic review and I think at that point they were talking about 2 to 3 billion pound valuation. You fast forward a year to the end of 2024 and there’s news of discussions with Brookfield, but with a structure, a partnership structure that would see Barclays relinquish about 80% of, their holding on the business in return for Brookfield reinvesting or investing to transform that platform to take it up to the competitive level that it needs to be for the future. You then fast forward to the current, and we have the announcement of the last day or so. Well, that partnership has taken a slightly different form where Barclays will invest in the business to the tune of about 400 million pounds over the next few years. Brookfield will then have the option to acquire up to 80% of the business in the sort of 3 to 7 year timeframe.

There’s really been a journey to get the right structure in place for both parties. Barclays looks to step back from that as part of its core strategy. Now that the deal is close to being complete, I think we’ll all be interested to see how that investment is deployed and how it transforms the business to compete with those broader global competitors going forward.

Bryan Derman: Yeah. Interesting the way that one has evolved. And fun for me to read that the lead representative from the Brookfield side was an old colleague of mine from NatWest, Ron Kalifa, or I should say Sir Ron Kalifa.

Chris Uriarte: I believe, yeah.

Bryan Derman: Now. And where do we know him from? He’s a guy who ran that Streamline business at one time and effectively made acquisitions that turned that business into, you guessed it, Worldpay, now folding into Global Payments.

The merchant services world remains a small community, and Ron has been at the center of it for a long time, so not surprising to see his name surface here and I’m sure he’ll do good things alongside Barclay’s Bank to reinforce and grow that acquiring business as well.

I think we’ll leave it there for today. We’re watching the results in the stock market. Some stocks up, some stocks down on the news. But as Chris has been pointing out, this will be a long game and the story isn’t told yet. I think the one conclusion we can reach today is it was probably a good day for GTCR who has owned that majority stake in Worldpay for less than two years now, I believe, and I think turned a very nice return today. So good on them for their foresight in seeing what the business could be. But we’ll see what all of these companies turn into longer term. Global, FIS, Worldpay, Barclays, Brookfield. We’ll have to see where they all go.

So thank you for joining me today, guys. And we will watch these deals and probably come back to the audience with an update on these views down the road. We’ve got a year to play with this one, so should be interesting. Thanks everyone for joining us today and keep doing the good work that you do. Bye for now from Glenbrook.