Rationale of the Deal
Wordline faces a fierce, fragmented and changing competitive landscape in the payment processing industry and it is trying to scale up to become a European champion. The company needs to complete Ingenico’s acquisition to keep pace with American rivals Fiserv and Global Payments as well as with FinTech companies and tech behemoths that are stepping in. Market consolidation has been driven by the need for scale to boost e-commerce offerings and to provide end-to-end payment services.
Likely to Get Quick Approval
Worldline is likely to get the EU antitrust approval on September 30 after the statutory deadline for a phase I investigation was pushed back 10 days. The companies’ businesses overlap in several European countries, particularly in the provision of (mobile) point of sales systems (mPOS or POS) in France, Belgium and Germany. The parties also overlap in the more profitable software for merchant business. Ingenico’s POS terminals delivers 43% of its revenues but any divestiture on this front isn’t likely to derail the deal as Wordline’s interest in Ingenico doesn’t come from the POS business, but rather the merchant side. In 2016, Wordline had to divest part of the business in Belgium to complete its acquisition of Paysquare and probably the company will have to divest more assets now.
Deal Synergies Despite Remedies
Worldline’s proposed remedies to appease regulators may not have a great impact on achievable synergies from this deal. Worldline could still realize profit synergies by combining Ingenico’s merchant-acquiring business even if some divestitures are necessary in some European countries given the companies’ large footprint in the merchant space. The impact of coronavirus on merchants will likely have a bigger impact on the companies’ revenue but the outlook is still positive.
EU Is Tightening its Grip on Fintech M&A
While Worldine-Ingenico may get a quick phase I approval, recent EU decisions in this sector may indicate that regulators are increasing their scrutiny over fintech deals. In the last few years, M&A such as FIS-Worldpay, Global Payments-TSYS and FIS-Fiserv were quickly approved with little or no scrutiny by regulators. Yet, in the last month Mastercard-Nets and Wordline-Ingenico had to offer remedies to obtain an EU approval. A few arguments could help to explain this change in the analysis: 1) the market is now more concentrated after past deals, 2) unlike Worldline, a European company, some of its US rivals have little presence in European markets and this helps to curb significant overlaps, and 3) perhaps the most interesting one, in the latest EU decisions, regulators seem to have defined markets more narrowly, increasing the merged entity’s market share and raising potential antitrust concerns.
Photo by Nathan Dumlao on Unsplash
