After fielding requests from ISOs interested in selling portfolios and from investors seeking to purchase them, Christopher Hernandez transitioned from ISO lending to linking portfolio sellers with active buyers. In January 2016, Portfolio Buyer launched and has since amassed a highly qualified and targeted network of buyers with no minimum or maximum restrictions on portfolio size, according to Hernandez.
The process for sellers begins with an initial questionnaire consisting of non-proprietary questions, such as number and type of merchants, name of processor, etc., which is followed by a call to discuss such things as seller motivation, whether the seller wants to retire or stay in business and work with the buyer. Non-disclosure and fee agreements are then signed.
The fees to sellers are straightforward. "The fee is very simple to calculate," Hernandez said. "There are no upfront fees. It is one multiple. If a company sells for 30 multiple, I'll get one and the selling company will get 29. For example, if a $10,000 monthly residual sells for 30 times ($300,000), the seller would receive $290,000 and we would receive a $10,000 fee. Anything over $100,000 in monthly residual income, that multiple becomes one-half multiple."
On average, the multiple on portfolio valuations ranges from 26 to 30, but can be lower for high-risk portfolios or more for top-notch portfolios. Portfolio Buyer's fee is paid out of the proceeds of the sale by the buyer at the time of closing.
Once the fee agreement and NDA are in place, the seller submits 12 months of residual statements and sales agreement, at which point buyers are contacted. Buyers also sign non-disclosure agreements with Portfolio Buyer to protect sellers. Data collected is forwarded to selected buyers for review and underwriting. Interested buyers are then connected with the seller via conference calls to discuss further details. After an offer is made and accepted, a purchase agreement is completed along with a redirection from the processor, whereby the seller changes bank information from theirs to the buyer's to allow future residual payments to revert to the buyer. Once the buyer receives confirmation of payment redirection from the payment processor, the transaction with the seller is then executed.
"A transaction means anywhere from 100 percent upfront in a few cases, but more typically between 70 to 80 percent upfront, and then depending on the structure, between 10 to 15 percent at month 12, and 10 to 15 percent as the final payment at month 24," Hernandez said, noting that to mitigate risk, buyers prefer to keep the seller vested in the portfolio for at least two years, with an attrition clause in place for the term.
A number of factors can impact the value of a portfolio and ought to be considered before entering sales arrangements. "On the low end, one is that it's high risk, meaning a high residual income, but very low merchant count," Hernandez said. "Another would be what type of merchant they are. Are they all ecommerce or are they brick-and-mortar? What their sales agreement looks like also plays a role."
High-value portfolios, on the other hand, tend to have a high merchant count, diverse range of merchants, no high concentration, low attrition rates, a solid processor, and a well-constructed sales agreement.
An important consideration is seller commitment to the buyer after the initial transaction. "Buyers love it when somebody wants to partner, to stay on board in one fashion or another, meaning either to partner or be an agent of the buyer," he said. "That helps improve value considerably. That shows they're not looking to cut and run." Having a second or third portfolio that acts as collateral against the attrition on the sale of the first one can also add to the valuation, he noted.
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Company Profile originally appeared in
The Green Sheet Issue 170601
220601 - Nationwide Payment Systems
211102 - Kalamata Capital Group
210701 - Choice Merchant Solutions
200601 - Delta Payment Solutions
190802 - Credit.net, a division of Infogroup
190702 - Samsung Electronics America Inc.
181201 - Network Merchants LLC
180902 - MainStream Merchant Services Inc.
180801 - Century Business Solutions
180502 - Priority Payment Systems Northeast
180501 - Merchant e-Solutions Inc.
180301 - Wirecard North America
180201 - Sysnet Global Solutions Ltd.
171202 - Secure Cryptopayments
171002 - National Benefit Programs LLC
170902 - Frates Insurance & Risk Management
170901 - DCS Holdings Group LLC
170802 - Apogee Payment Systems LLC
170702 - Active Software & Hardware Systems
170701 - Veratad Technologies LLC
170502 - Frontline Processing Corp.
170501 - Platinum Choice Bancard LLC
170201 - Electronic Payments Inc.
161202 - International Bancard Corp.
161201 - CSR Professional Services Inc
161102 - Digitzs Solutions Inc.
161101 - Residual Sheriff LLC.
160801 - DigiPay: Solutions Inc
160702 - CreditCardProcessing.com
160201 - Lead Tracking Systems LLC
151202 - Benseron Information Technologies Inc.
151201 - CardWare International Inc
151101 - Lion Capital Group LLC
150801 - Topcreditcardprocessors.com
150702 - Vision Payment Solutions LLC
150601 - Conformance Technologies
150502 - Global Processing Systems
150402 - Mercantile Processing Inc.
150401 - Field Guide Enterprises
150302 - Signature Card Services
150301 - Premier Payment Systems Inc.
150201 - Humboldt Merchant Services
150102 - Expansion Capital Group LLC
141102 - National Merchants Association
141001 - Instant Credit Manager
140902 - Merchant Cash and Capital LLC
140701 - National Transaction Corporation (NTC)
140601 - Total Merchant Services
140501 - Nationwide Payment Solutions
140501 - BPC Banking Technologies
140301 - Meritus Payment Solutions
140201 - Process Pink Payments LLC
131202 - First American Payment Systems L.P.
131102 - Evo Payments International LLC
131001 - Live Reps Call Center
130901 - Regal Payment Systems LLC
130901 - The Merchant Solutions
130802 - North American Bancard LLC
130801 - Payment Logistics LLC
130702 - Plug n Pay Technologies Inc.
130601 - U.S. Merchant Systems LLC
130402 - National Processing Co.
130202 - Charge Card Systems Inc.
130202 - Layered Technologies Inc.
130102 - Glazer_Kennedy Insiders Circle LLC
121202 - American Microloan LLC
121102 - Keep in Touch Systems Inc.
121102 - Merchants Choice Payment Solutions
121002 - Washington Bancard Merchant Services LLC
120902 - Central Payment Co. LLC
120802 - Royal Merchant Holdings LLC
120801 - National Benefit Programs LLC
120602 - Cardinal Commerce Corp.
120601 - Veritrans Merchant Services LLC
120502 - ExecuTech Lease Group
120502 - The Small Business Authority
120402 - Chargeback Guardian Inc.
120401 - Electronic Payment Exchange
120301 - Complete Merchant Solutions LLC
120201 - CSR - Compliance Solutions and Resources
120102 - Alpha Card Services Inc.
111002 - Lead Source Call Center
111001 - First Annapolis Consulting Inc.
110902 - Point of Sale System Services Inc.
110901 - Sage Payment Solutions
110801 - Century Payments Inc.
110702 - Creative Vision Studio LLC
110702 - Network Merchants Inc.
110701 - Capital Access Network Inc.
110602 - eProcessing Network LLC
110602 - Moneris Solutions Inc.
110502 - Paragon Application Systems Inc.
110401 - Merchant Implementation Services
110301 - FrontStream Payments Inc.
101202 - CheckAlt Payment Solutions
101102 - Impact Payments Recruiting
101101 - Global Electronic Technology Inc.
101002 - TriSource Solutions LLC
100802 - Federated Payment Systems LLC
100801 - Voltage Security Inc.
100601 - NETSURION (formerly Vendor Safe Technologies)
100502 - Transaction Network Services Inc.
100402 - Secure Payment Systems Inc.
100401 - Elite Merchant Solutions
100302 - Retail Decisions Inc.
100102 - Payment Alliance International
091201 - Performance Training Systems Bankcard Boot Camp
091101 - Merchant e-Solutions Inc.
091002 - Whitehall Capital Advisors LLC
090901 - CoCard Marketing Group LLC
090801 - First National Merchant Solutions
090701 - checXchange Money Transfer Systems Inc.
090601 - Sterling Payment Technologies
090502 - Infinity Payment Systems
090501 - Merchant Cash and Capital
090401 - UseMyBank Services Inc.
090401 - Data Delivery Services Inc.
090302 - Velocity Merchant Services
090302 - Metro Merchant Services
090301 - Smart Transaction Systems Inc.
090301 - DCC Merchant Services USA LLC
090202 - TransFirst Holdings Inc.
090201 - ACH Payment Solutions
081202 - Affirmative Technologies Inc.
081201 - On-line Strategies Inc.
081101 - Vision Payment Solutions LLC
081002 - Veratad Technologies LLC
081001 - International Merchant Solutions LLC
080801 - GreenSoft Solutions Inc.
080702 - Smart Circle International
080601 - International Bancard Corp.
080502 - DRG Telemarketing Inc.
080501 - BCC Merchant Solutions
080402 - U.S. Merchant Systems
080401 - Greystone Business Resources Corp.
080302 - Transmedia Payment Services Ltd.
080102 - Sonoma Technical Support Services
071202 - Barclay Square Leasing Inc.
071102 - FirstView Financial LLC
071001 - Sage Payment Solutions
070902 - YourTownMall Business
070901 - Nxgen Payment Services
070802 - All card Processing-AAMonte-USA
070801 - Money Movers of America Inc.
070602 - Central Point Resources Inc.
070601 - Positive Feedback Software LLC
070502 - Premier Payment Systems
070501 - Amacai Information Corp.
070402 - National Bankcard Systems