Global Payments embarked on a new acquisition spree Wednesday with the $500 million purchase of payments software company MineralTree, launching its formal entry into the business-to-business arena, the company said in Wednesday a press release.
The purchase is the start of the Atlanta payments processor's plan to inject $28 billion into acquisitions, and other investments, over the next four years, Global Payments executives said during a three-and-a-half-hour presentation to analysts and investors Wednesday.
At the virtual investor event, Global Payments executives sought to recast the company as a new age industry disrupter, leaving behind any baggage as a slow-moving legacy player. In the face of increased competition, the company has encountered investor skepticism and its stock price started sliding in April. Nonetheless, shares reversed course after the executives argued Wednesday that Global Payments will benefit and grow in a world moving toward digitization of payments and away from cash and checks.
Global Payments provides payments services to banks and other financial institutions that issue credit and debit cards requiring processing for transactions and management of related data. It also sells its services to merchants online and offline, providing them with software and hardware for payments processing.
Global Payments CEO Jeff Sloan said the company had made a full recovery from the negative impact of the deadly COVID-19 pandemic that began last year and cut into consumer spending. He noted the company has recently had some of its best earnings performances. Revenue rose 15% for the first half of the year to $4.1 billion and net income more than doubled to $465.2 million, the company said last month.
Still, Sloan recognized past shortcomings, including related to the company's $21.5 billion mega-merger with Total System Services in 2019, and suggested it was past those difficulties.
“We haven't done everything correctly and I think it's important to acknowledge that. We moved too slowly at legacy TSYS (Total System Services) to modernize our distribution channels — a process that we began at (Global Payments) in 2012,” the CEO said at the Wednesday presentation. “It's good to have top competitors and smart customers. We are the better for it.”
The MineralTree acquisition will bolster Global Payments software services for accounts payable, procurement processes, invoicing and virtual cards, among other offerings. It was purchased from a group of venture capital investors.
While MineralTree isn’t currently profitable, it will boost Global Payment earnings as it scales the software capabilities across its worldwide platform, the executives said.
MineralTree’s annual revenue is estimated to be in the mid-$20 million range and the unit is likely to grow at a 20% annual clip, given the “good cross-sell opportunity,” according to a report from analysts at Baird Equity Research.
“That transaction completes the suite of cloud-native SaaS [software-as-a-service] that we needed to attack the accounts payable markets,” Sloan said at the investor presentation. “We have all the scale. We just needed the software, and we now have that with MineralTree.”
As Global Payments scales the MineralTree business, it may be in similar or additional industry verticals, following on MineralTree's niches already carved out in healthcare, education, non-profits and food and beverage.
Increased earnings this year will bolster capital available for acquisitions and other investments, giving the company about $28 billion to direct at growth efforts over the next four years, Global Payments CFO Paul Todd said during the presentation.
“We retain tremendous firepower to do transactions with billions available in liquidity,” Sloan explained. “And that's on top of the two-and-a-half billion dollars we've already invested in acquisitions during the last 10 months, much of it in cloud SaaS. We expect nearly $30 billion of liquidity for investment over this cycle, and our pipeline remains full today.”
Future acquisitions could be made across the Global Payments business, including to supplement the new business-to-business foray, the executives said.
“We believe M&A will remain core to the capital deployment strategy in the coming quarters and years,” a report from financial firm William Blair said in commenting on the new information delivered Wednesday.
Sloan contends Global Payments worldwide reach is a competitive advantage, with a local presence in some 38 countries that helps it outsell rivals.
The company has a global workforce of about 24,000 that includes a sales team of 3,500. That broad operation, including cross-border services in about 170 countries, aids the company in scaling by way of acquisitions, he said.
In another announcement Wednesday that speaks to the company's international growth, Global Payments said it's expanding a tie with the financial services group Virgin Money to add new digital features for users of that British company's credit and debit cards.