The Impact on Value of Technology and Geography in Merchant Acquiring

Navigator Edition: June 2015
By: Marc Abbey and Scott Calliham

The value of any business is a function of its characteristics and prospects—its growth, margins, and strategic assets—and the idiosyncratic elements of a company are the most important determinant of its value.  However, patterns emerge regarding where buyers are seeing the greatest value—what categories are associated with differing valuation levels.  In the past five years in the acquiring business, technologies and product as well as the geography of the seller, have had a substantial impact on value.

First Annapolis examined over 70 acquiring and acquiring-related merger and acquisition transactions in the past five years and categorized the sellers into three basic categories:  1) single-country players that have no particular product or technology advantage, 2) single-country sellers that do have some product or technical differentiation, and 3) multi-country players with a product or technical advantage.  As illustrated in Figure 1, these categories are associated with a significant swing in valuations.

There are some correlations between these categories and other factors that drive value. For example, multi-country, technology-diversified competitors have grown faster than their counterparts. It is also true that there is a great deal of variation around the average within each category; there are single country players with high valuations and multi-country players with low valuations. Nevertheless, we think these outcomes are a fair representation of the value buyers are assessing to acquiring assets of differing sorts and reflect a buyer expectation that technology, product set, and internationalization will be of greater importance to acquiring competition to come.

Figure 1: Revenue Multiple for Select Acquiring M&A Transactions 2010-2015
(Purchase Price Divided by Trailing Twelve Month Net Revenue)
Fig-1_Revenue-Multiple-for-Select-Acquiring-M&A-Transactions-2010-2015Source: First Annapolis Consulting M&A database and analysis; N= 71.

For more information, please contact Marc Abbey, Managing Partner,; or Scott Calliham, Principal,, both specialize in Merchant Acquiring.

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