Angling for a piece of the growing card-payment industry, Silicon Valley buyout firm
Silver Lake, which calls itself the world’s largest technology investment firm, announced April 14 that it agreed to make a “strategic growth investment” in Mercury Payment Systems, buying 60 percent of the Durango, Colo., company through its
Mike Bingle, a managing director in Silver Lake’s New York office and co-head of North American private equity, said Mercury Payment Systems targets small and mid-sized merchants by letting software developers incorporate its payment technology into their own point-of-sale systems.
“The way they go after that market—and this is core to our business thesis—is by executing a very innovative business model,” essentially giving away the interface to its payment network so that others can incorporate it into their own retail-management systems, Bingle said. “Rather than having sales people knocking on doors, they have created a powerful go-to-market model by partnering and integrating with hundreds of point-of-sale software developers.”
Silver Lake’s deal is the latest in a card-processing market that is undergoing rapid consolidation.
Visa Inc., the largest card network in the United States, announced a strategic agreement on April 21 to buy CyberSource Inc. of Mountain View, Calif., for $2 billion, as a way to expand its e-commerce offerings.
“Other major merchant acquirers are for sale. I think activity is only going to increase,” said David Fish, a senior analyst at Mercator Advisory Group Inc., an independent payments research firm in Waltham, Mass., noting that Royal Bank of Scotland Group PLC, for one, is shopping its RBS WorldPay card-processing unit. Five bidders, including four buyout firms, are said to be finalists for the business.
Silver Lake sees Mercury Payment Systems as a platform on which to expand its payment business, although the firm is not likely to combine that strategy with the street-level sales teams that many independent sales organizations use to reach the merchant market, he said. “There is a tremendous amount of growth left in this market,” he said. “We just do not see a reason to create tension with Mercury’s channel partners.”
Silver Lake said that Matt Taylor, Mercury Payment Systems’s chief executive officer, will continue in that role, and company founders Marc Katz and Jeffrey Katz, and existing investor Larry Stone, will retain a 40 percent ownership stake and will continue to serve on its board.