Strategics Study Payment Firm Merchant e-Solutions

The auction of Merchant e-Solutions is one of the few financial technology deals still racing to get done before the end of the year.

Merchant e-Solutions is drawing interest from strategics including Global Payments and Intuit, two sources told, a sister Web site to Buyouts, although a third source, a banker, said, “Global Payments is unlikely to buy Merchant e-Solutions given the high price.” Cielo, the Brazilian payment processor, is also believed to be looking at Merchant e-Solutions, a different person said.

It’s not clear whether the private equity sector is still involved in the auction. One source said that buyout shops opted out of the auction due to Merchant e-Solutions’s high price tag. In October, the payment processor, which is backed by Trident Capital, was seeking bids of 15x, which is considered to be very rich. Merchant e-Solutions produces roughly $40 to $45 million EBITDA. J.P. Morgan and Bank of America are advising on the sale.

Former executives of BA Merchant Services, a unit of Bank of America, founded Merchant e-Solutions in 2000. Sharif Bayyari, Merchant e-Solutions’s current president, CEO and chairman, was president and CEO of BA Merchant Services. Jim Aviles, current COO of Merchant e-Solutions, was a senior vice president at BA Merchant Services.

Trident Capital, a venture capital and private equity firm, invested in Merchant e-Solutions in 2000. It is not clear how much the firm provided or how much it currently owns. A 2005 Trident newsletter said that Merchant e-Solutions, at the time, had raised $27 million in capital. Trident’s investment in Merchant e-Solutions came from its fourth fund, which raised $350 million in 2000, according to a press release.

W Capital, a direct secondary buyer based in New York, also owns a stake in Merchant e-Solutions. It is not clear when the firm invested or how much it owns. However, W Capital’s stakes range from 5 percent to 30 percent, according to its Web site. In 2003, 3i Group also invested in Merchant e-Solutions when it led a $7 million Series C round. 3i has apparently sold its stake. Merchant e-Solutions is listed as a former investment on 3i’s Web site.

Bayyari owns a majority of Merchant e-Solutions. “Sharif always had very outrageous price expectations,” the banker said. “I don’t think the growth rate supports what he’s asking.”

High price expectations have scuttled other financial technology deals this year. In the fall, Lindsay Goldberg pulled the sale of First American Payment Systems, an electronic payment processor, after seeking bids of 12x EBITDA. The high price—deemed unrealistic by many—caused several buyout shops to walk away from the auction after conducting due diligence. Lindsay Goldberg ended up recapping First American and taking a roughly $135 million dividend from the company.

Officials for Merchant e-Solutions, Cielo and Global Payments couldn’t be reached by deadline for comment. Intuit declined comment.

Luisa Beltran is a senior writer for peHub, a sister Web site of Buyouts.