Page 56 - Pay Magazine s2014

finance & strategy
The ABCs of the Industry’s IPOs
Bullish about IPOs?
Investors are excited about several companies in the payments eld, which is why there’s so much interest in them and why payments companies, for the most part, have been well-received by investors.
“The main reason why some companies have chosen IPOs
is that the public markets are
very excited about the payments [companies] that already are publicly traded,” says, Gil Luria, managing director at Los Angeles- based banking and investment services provider Wedbush Securi- ties. Visa and MasterCard are trading at all-time highs, he says, adding that the success of mer- chant acquirers and processors, such as Vantiv Inc., “have created a fertile ground for companies that are processing payments and want to be publicly traded as opposed to sell to another company,” he tells Pay Magazine.
Rick Oglesby, partner, Double Diamond Group, agrees the recent IPOs have created a positive buzz for the industry, which has raised the industry’s pro le. Payments industry companies going public establish valuations that provide good benchmarks of other compa- nies. “Overall, it’s likely to lift valuations a bit, increase interest and increase capital availability,” he adds.
Despite public o erings of stock making headlines, IPOs haven’t displaced M&A activity in pay- ments, according to Larry Berlin,
a vice president at private equity and investment banking rm
First Analysis. He points to several examples. Global Payments Inc. agreed to purchase Heartland Payment Systems Inc. for $4.3 billion—the deal was announced
in December and is expected to close in May. Payments technology rm FIS acquired IT services pro- vider SunGard in the second half of 2015 in a $9.1 billion deal. What’s more, nancial app developer Yodlee Inc. announced last August it was selling all shares of the company to Envestnet Inc., a provider of wealth management technology and services. The sale, valued at $660 million followed Yodlee’s 2014 IPO. “While there’s a good number of IPOs in 2015, there’s a really good number of M&A deals, so I don’t look at IPOs or stock o erings as replacing M&A in general,” Berlin says.
IPO Impetus
Analysts cite several possible reasons for companies ling for an IPO, such as a way for their
The main reason why some companies have chosen IPOs is that the public markets are very excited about the payments [companies] that already are publicly traded.
—Gil Luria, Wedbush Securities
investors “to get liquid” by being better able to sell their shares, raising capital to keep up in a competitive market through acqui- sition or to pay down debt, accord- ing to Eric Grover, consultant, Intrepid Ventures. “Public markets provide you with a ready source
of raising equity capital and investors with an IPO exit,” he says. “If you didn’t need growth capital, acquisition currency or didn’t
have investors wanting to cash
out, there are a lot of reasons to stay private.”
Jay Antenen, senior editor, Deal- reporter, says companies like First Data have been under pressure by long-time investors to start work- ing toward exits that would give them liquidity to sell their shares. “Going public gives them a plat- form to begin that process.”
There’s only so much money that can be raised in the private mar- kets, from either venture investors or private equity investors, accord- ing to Wedbush Securities’ Luria.
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