Mashing together the plumbing of the payments industry has provided a steady stream of deals for bankers. With Nexi SpA inking its agreement to buy Nets S/A over the weekend, the European sector now looks to be coalescing around two players, one French and one Italian. But this is probably only the end of the beginning for consolidation.
Nexi’s combination with private-equity-owned Nets, plus its recent deal to buy SIA in Italy, will create a company with an enlarged market value implicitly north of 20 billion euros ($24 billion). French rival Worldline SA, which agreed to buy domestic peer Ingenico SA earlier this year, is likewise worth around 20 billion euros. Lots of smaller deals by these various companies have created what now appears to be a neatly concentrated listed sector. But that doesn’t mean the dealmaking is over.
The UK has been oddly left out of the action despite London being Europe’s financial center. The emergence of sizeable European payments firms has arguably been a missed opportunity for the likes of Barclays Plc, Lloyds Banking Group Plc and Natwest Group Plc, the original owner of Worldpay, now part of Fidelity National Information Services Inc. Worldpay could have chosen to be a European consolidator, but instead pivoted to the US and global e-commerce, and was soon gobbled up.
Barclays’s payments assets could potentially be a platform on which to build. But for now, London’s interest in this story is mainly about the teams at private equity firms Advent International Plc, Bain Capital and Hellman & Friedman that have led the growth of Nexi and Nets. Buyout firms will still own a significant minority holding in Nexi after its recent transactions and they have agreed to lengthy lockups.
For all of the activity, the European payment market remains fragmented. The major UK, French and Spanish banks sit on platforms that would make logical disposal candidates at the right price. It’s not easy for them to commit capital to these operations and lead expansion by acquisition.
So there’s probably no shortage of available transactions to fuel continued expansion at Nexi and Worldline — or even a fresh roll-up vehicle.
—Bloomberg