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Two weeks after first bidding for the online-payments processor, Blackstone and CVC Capital Partners have agreed to purchase Paysafe for £2.96 billion, or about $3.9 billion. Consummation of the deal is the latest sign of the acquisitive eye investors are turning toward the sector: The UK’s Worldpay and Texas’ ACTIVE Network are among the other payments companies set to change hands this year in billion-dollar-plus deals.
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A look at private equity investment in the financial software space helps tell the story. After a gradual climb in deal count since the financial crisis, last year experienced a major spike. And this year is on pace for similar figures, according to the PitchBook Platform, as you can see here:
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Many of 2017’s high-profile payments targets are based in Europe—including Paysafe, which is headquartered in the Isle of Man and trades on the London Stock Exchange. But last year’s rise in PE activity was driven by deals in the US. Dating back to the start of 2004, about 41.5% of all private equity deals in the financial software space occurred in Europe, compared to 41% in the US. Last year, meanwhile, the US was home to 49% of deals, while Europe’s share dipped to 31%.
Paysafe’s growth during the current decade is indicative of why private equity firms increasingly see payments companies as sound investments. Between 2011 and 2016, the company improved its annual revenues from $128 million to more than $1 billion, while its EBITDA swelled from $18 million to more than $300 million. In the past 30 months, meanwhile, Paysafe’s share price has increased by 157%. The cause in part is consumers' increasing willingness to spend money online, including in Paysafe's area of focus, the online gambling sector.
Blackstone and CVC’s offer represents a 42% premium to Paysafe’s average stock price in London for the 12 months that ended June 30. The company’s board has unanimously recommended the deal, which will require approval from at least 75% of Paysafe’s shareholders.
Article by Kevin Dowd, PitchBook