Thursday, August 1, 2019
The $22 billion acquisition of leading payment processor First Data Corp. by financial technology giant Fiserv is now complete. And the first casualty of the deal came within hours of news of that completion: Bank of America Merchant Services.
BofA’s BAMS, which has operated as a joint venture with First Data for decades, will strike out on its own beginning next year. This would make BAMS the sixth largest merchant acquirer in the United States, absent any new mergers and acquisitions in the acquiring space, said Raymond Pucci, director of the merchant services group at Mercator Advisory Group.
The BAMS joint venture represents between 10 percent and 12 percent to First Data’s revenues, according to investment analysts at Sanford C. Bernstein. BofA, in a press release, said First Data has agreed to service joint clients through at least June 2023.
The bank also said First Data will continue to be “an important service provider,” as BAMS will be outsourcing its processing workload to First Data (now Fiserv) at least until it can build out its own technology infrastructure. Both parties will be subject to a mutual non-solicitation agreement through June 2021.
“Payments are at the core of our business, and this announcement is another step forward in our global strategy to provide companies of all sizes an integrated payment offering. We look forward to investing in our merchant solution and delivering the capabilities our clients need to thricv in an ever-changing payments environment,” said Mark Manaco, head of enterprise payments at BofA.
Jeffrey Yabuki, chairman and CEO at Fiserv, described the First Data deal as “a major milestone.” Frank Basignano, who had been chairman and CEO of First Data and is now president and chief operating officer at Fiserv, added, “As a newly combined company, we will leverage our technology expertise and integrate our solutions to serve client needs in ways no one else can match.”
Fiserv downplayed the significance of BofA dropping out of the joint venture, explaining in a presentation to investors that “the financial impact of the separation will be neutral to accretive to Fiserv adjusted [earnings per share] and free cash flow for the next three to five years.”
Pucci suggested, howoever, the combination could spur new competition from other merchant acquiring powerhouses. “Surely, competitors such as Global Payments/TSYS and Worldpay are looking to pick off some accounts as a result of the Fiserv-First Data merger,” he noted in a blog post. “Of course, they are going through their own M&A-driven consolidation as well.”
In March, not long after news broke of Fiserv’s acquisition of First Data, Fidelity National Information Services (FIS) acquired Worldpay Inc., and in May, Global Payments and TSYS announced merger plans.
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