On Oct. 28, 2009, Cynergy Data Corp. confirmed that it had been acquired by private investment firm The ComVest Group for $81 million, officially ending the company's widely publicized and high-profile reorganization under Chapter 11 of the United States Bankruptcy Code.
The acquisition was finalized on Oct. 26, according to Marcelo Paladini, who founded Cynergy and has assumed the role of Vice Chairman and Executive Vice President of Business Development under terms of the agreement. Cynergy filed for bankruptcy on Sept. 1, 2009, and the news that one of the payments sphere's biggest processors had entered chapter 11 proceedings jolted the industry, prompting widespread concern about the event's potential fallout.
Paladini said the company's proceedings with the United States Bankruptcy Court for the District of Delaware ended on Oct. 9, when the court approved a takeover by ComVest, and that "from there it was just a matter of putting documentation in place" to close the deal. He pointed out that a takeover by ComVest was Cynergy's preference from the beginning. "ComVest positioned themselves all alone as a favorite for a number of reasons," Paladini said. "Not only the price, but also how they were aligned with the vision of the company, with its background and objectives in the industry. They were able to move very fast and had an amazing team of payment professionals with an extensive background in the electronic payment industry."
Paladini said a number of factors influenced the court's decision to award the sale to ComVest. Among them were that ComVest purchased all of Cynergy's assets, made a commitment to retain its entire worker base and planned to "expand rather than downsize" the company - including expanding its sales force.
ComVest Operating Partner Randy McCoy added that ComVest would honor the company's many merchant and ISO agreements in all their particulars. "We accepted every merchant agreement and accepted every ISO agreement under the terms and conditions that were negotiated by the ISOs when they did their original deals with Cynergy," McCoy said. "We honored all the commitments, which we think plays to the heritage of the company, which is to service in an exceptional way their ISOs and merchants."
McCoy said that ComVest had long taken an interest in Cynergy, even before the bankruptcy. He said that ComVest was focused on helping Cynergy deliver enhanced technology to its partners on an accelerated timetable, but that the takeover would not fundamentally alter Cynergy's mission.
"The day we acquire it, Cynergy operates, and operates profitably, and can fuel its own," he said. "ComVest is clearly there to help and invest in creating a path forward, but the company is able to sustain its own innovation and self-investment as well.
"We felt if we partnered to bring ComVest talent and investment and resources together with what Cynergy had evolved to, we'd bring innovation to the industry faster than it has come. We think we start with the best platform and are going to be able to innovate it better than anyone else. ... The key to our success is to bring a superior product and service to the market."
Payments industry attorney Adam Atlas said ComVest's commitment to retaining Cynergy's existing ISO agreements is a crucial part of an acquisition that many in the industry had worried could be detrimental to the company's sales force. "Every ISO and agent out there wants to know what would happen if there were a bankruptcy of their processor or super ISO," Atlas said. "I think this is going to set a precedent, or at least a benchmark of expectations for ISOs and agents.
"If [ComVest] is honoring the old ISO agreements and obligations, then I applaud them for that. It proves that there is hope in this industry for ISO partners and agents of a processor that goes through a bankruptcy." McCoy added: "It's important for the industry to see a significant processor have to go through the chapter 11 process and come through it quickly and cleanly with everybody's assets intact."
Paladini said the acquisition will bring particular relief to Cynergy's ISOs, adding that its sales partners have received all of their residual payments throughout the bankruptcy ordeal. He said that in July, the company "experienced a very minor delay of a few days" in making residual payments, which immediately set off fears among its ISOs that their payments were in jeopardy and prompted industry-wide rumors of the same. He added that every subsequent payment has been punctual, and the company "has been meeting all of its obligations and will continue to do so especially now that we're in a much stronger position. Not only has this experience been a cleansing process, but it has served the company to learn from our mistakes, and how we can be a better partner and player in the marketplace," he noted. "We've seen already our business accounts going up as people understand that this has been put behind. It's a new beginning for the company and a new beginning for our partners in the ISO community."
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