Fiserv $22bn Merger with First Data

By Harvey George and Jules Merringer (LSE & University of Michigan) - Date: 02/02/2019

Overview of the deal

  • Acquirer: Fiserv Inc. (NASDAQ: FISV)

  • Target: First Data Corporation (NYSE: FDC)

  • Estimated value: $22 billion

  • Announcement date: 16th January 2018

  • Acquirer Advisors: J.P. Morgan

  • Target Advisors: BAML

On January 16, 2019 Fiserv, the financial technology solutions provider, announced it will buy First Data, the world’s largest payment processor, in an all-stock acquisition valued at $22 billion, making it one of the largest acquisitions in the fintech sector. First Data investors will receive a fixed exchange ratio of .303 shares of Fiserv for every share of First Data common stock they currently own, valuing First Data at $22.74 per share as per closing on January 15th and representing a 29.6% premium for First Data shareholders. Once the deal closes in the latter half of 2019, the company projects its EPS to increase by more than 20%.

Though Fiserv mainly provides large financial institutions with payments software, by partnering with First Data, a fintech company that sells electronic payment processing hardware to all types of businesses (herein referred to as merchants), the combined company will be in a position to offer products to customers across the institutional spectrum, from banks to SMEs, seeking to adapt to the changing payments landscape. Fiserv will be able to offer First Data’s Clover Point-of-Sale (POS) capabilities to their financial services clients, while First Data can introduce Fiserv's biller solutions and cash management solutions to their corporate clients. The combined company also plans to invest $500 million over the next five years to develop technologies in the payments space, including better merchant services, advanced risk management, digital enablement and data focused solutions.

Pending shareholder and regulatory approval, Fiserv’s CEO Jeffery Yabuki will become chairman and CEO of the combined firm while First Data’s CEO Frank Bisignano will become president and COO of the combined firm.

“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information” -Jeffery Yabuki, Fiserv CEO

Company Details (Fiserv Inc.)

Fiserv is a financial-services technology provider that serves retailers, merchants, and large financial institutions such as banks and credit unions. Fiserv has two main business components. The payments segment provides electronic bill payment services, internet and mobile banking software, and debit and credit card processing. The financial segment provides financial institutions with account processing services, loan origination, and cash management and consulting services.

- Founded in 1984, headquartered in Brookfield Wisconsin, (U.S.A.)

- CEO: Jeffery Yabuki

- Number of employees: 24,000

- Market Cap: $33.4bn- EV: $38.5bn

- LTM Revenue: $5.7bn - LTM EBITDA: $1.87bn

- LTM EV/Revenue: 6.7x - LTM EV/EBITDA: 20.7x

Company Details (First Data Corporation)

First Data is a financial technology firm that is one of the world leaders in providing electronic commerce solutions for merchants, financial institutions, and card issuers worldwide. The company offers retail point-of-sale merchant acquiring and e-commerce services, as well as its cloud-based Clover POS operating system. The company handles 40% of all US credit and debit transactions.

- Founded in 1971, headquartered in Atlanta, Georgia, (U.S.A.)

- CEO: Frank Bisignano

- Number of employees: 22,000

- Market Cap: $23.5bn - EV: $43.6bn

- LTM Revenue: $8.6bn - LTM EBITDA: $3.02bn

- LTM EV/Revenue: 5.1x - LTM EV/EBITDA: 14.4x

Projections and Assumptions

Short term consequences