By Samuli Karjalainen, Chiara Fulvi, Jonathan Fuchs, Lolade Aluko, Eden Yang (LSE), and André Assouline, Olivier Baverez, Alexis Bernet, Kévin Insixiengmay, Martin Palomar (HEC)
Overview of the deal
Acquirer: FTAC Olympus Acquisition Corp.
Implied Equity Value: $3.8B
Total Transaction Size: $3.3B
Closed date: June 2021
Target advisor: Financial Technology Partners (exclusive financial and capital markets advisor)
Payoneer announced its SPAC merger with FTAC Olympus Acquisition Corp in order to go public, on the 3rd February, 2021 for $3.3 billion. Payoneer is a New York-based and originally Israeli Fintech company leading in online payment services, with over four million customers around the world, serving B2B and B2C segments. FTAC Olympus Acquisition Corp is a blank-check company which has been formed with the purpose of acquiring or merging with a financial services technology company, and it has finally chosen Payoneer. As part of the agreement Payoneer is set to receive $563 million in cash. The merger will allow the company to finance its expansion into new markets, serve new segments and extend its product portfolio. The transaction will be one of the most significant SPAC deals of the year and further fuels the boom in the SPAC asset class.
““As much as we have accomplished to get to where we are, we really think we’re just scratching the surface and we’re just at the beginning stages,” “We have a busy agenda.”” - Scott Galit, CEO of Payoneer
Company Details: (Acquirer - FTAC Olympus Acquisition Corp.)
FTAC Olympus Acquisition Corp. (NASDAQ:FTOC) is a blank check company incorporated as a Cayman Islands exempted company. In other words, it is a publicly-traded company that has no established business plan benefiting from the lack of corporate taxation in Cayman Islands. The company was created for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities.
Founded in 2020, headquartered in Philadelphia (PA), United States
CEO: Ryan Gilbert
Number of employees: N/A
Market Cap: 1,273.4 mm $ (as of 05/02/2021)
EV: 1.310 mm $
LTM Revenue: N/A
LTM EBITDA: N/A
LTM EV/Revenue: N/A
LTM EV/EBITDA: N/A
Company Details: (Target - Payoneer)
Payoneer is a global payments platform enabling marketplaces, enterprises and small and mid-sized businesses to operate secure and low-cost cross-border payments. It provides its clients with a large range of payments, tax, credit cards and working capital solutions, multi-currency accounts, merchants, compliance and risks services. Payoneer’s operations rely on a strong technology, risk and compliance infrastructure.
Founded in 2005, headquartered in New-York, United States
CEO: Scott Galit
Number of employees: 1,500
Market Cap: N/A
LTM Revenue: $345M (as of 12/31/2020)
LTM EBIT: $-18M (as of 12/31/2020)
LTM EV/Revenue: N/A
LTM EV/EBITDA: N/A
Projections and Assumptions
The Payoneer - Ftac Olympus Acquisition merger talk is seeing progress just a month after Paysafe, another multinational payments company, confirmed its merger with Bill Foley’s SPAC. While the terms of Payoneer’s deal are still unknown, we can begin to draw some parallels with the Paysafe - Foley Trasimene Acquisition II merger. As part of the deal, Bill Foley will chair the merged company while Philip McHugh will continue to lead the firm as CEO. Foley’s extensive experience in financial services as Chairman of Fidelity National Financial and Black Knight Financial Services as well as his contributions to professional sports in Las Vegas will undoubtedly bring expertise to Paysafe’s executive team as they navigate the world of online sports betting. Likewise, fintech veterans Betsy Cohen and Ryan Gilbert will add depth to the forward planning of Payoneer as a digital payment and transfer service provider.
With operations in around 200 countries and an employee base of 1,500 hailing from 21 countries, Payoneer is well-positioned to receive investor attention internationally. Airbnb, one of its biggest business partners, will continue to drive up demand for its payment services as the world recovers from the pandemic and travel restrictions get lifted. Since its Initial Public Offering (IPO) last December at $68 a share, Airbnb has far surpassed $100b in valuation. Having already raised $270m from Series E and private equity investments with the latest round led by Technology Crossover Ventures, the potential SPAC listing will provide Payoneer with much-needed capital to develop its infrastructure and compete with Paypal, Stripe and the like.
Although Payoneer operates internationally, it only occupies about 0.02% market share in global payment processing. In the long-term, this SPAC deal will likely aid in forging necessary partnerships in developing markets and acquiring payment infrastructure startups. This would accelerate Payoneer’s development in personal transacting to complement their already popular B2B solutions. This comes at a time where Wirecard AG, a prominent German payment processing provider, enters insolvency proceedings, serving as an opportunity for Payoneer to close a significant new gap in the European payment processing market.
Payoneer has also reacted quickly to Brexit and opened a Dublin office in a bid to protect its uninterrupted cross-border commerce in the EEA. As Payoneer supports EU sellers on the Amazon platform, the company has considerable long-term resilience in its cross-border payment offerings, supporting its growth prospects as a target.
However, as SPAC compensation for sponsors is 20% post-IPO equity, the returns for long-term investors is much more diluted than in traditional IPOs. Many prominent investors, including hedge fund manager Gabriel Grego and Goldman Sachs Chief Executive David Solomon, criticise the vehicle, stating concerns on how a lack of development in proper incentives for SPAC founders suggests an "unsustainable boom". Overall, the common complaints against SPACs remain, and in the event of FTAC merging with Payoneer, the target will likely reap significant liquidity benefits to develop their pipeline of payment-processing products, while Betsey Cohen and other sponsors of the SPAC will benefit from the 20% promote fee, diluting shareholder returns upon acquisition.
Risks and Uncertainties
Payoneer has been able to secure big names, such as Amazon, Google and Airbnb as their clients. However, we cannot ignore the fact that Payoneer is competing in a market where it does not reign supreme. Payoneer’s volume of transactions amounting to $44bn in 2020 is dwarfed by that of Paypal which stood at $712bn. Furthermore, Scott Galit has said they are seeking to do mergers and acquisitions of their own, which could incite competitors to do the same thereby threatening Patoneer’s strategy.
It was recently revealed (as of February 5, 2021) that Juan Monteverde, CEO of Monteverde & Associates PC, is carrying out an investigation into FTAC’s valuation process wherein the SPAC allegedly violated securities laws and/or breached their fiduciary duties.
The majority of the company’s income relies on a select array of partners’ demand, any setback to one of their biggest partners (Amazon, Google) or a decision to change providers would highly affect Payoneer’s income.
Finally, Payoneer operates in many countries, that is within multiple legal frameworks on international payments which are contingent to each country’s ever-changing policies. The most notorious threat to the harmony of Payoneer’s business is China: given that it represents a big portion of the company's earnings, the government's erratic foreign policy and strict control over capital flux can impact Payoneer's business directly going forward.
“Payoneer is a wonderful example -- and I’d be hard pressed to reach for another one that is quite as well advanced -- in which the adoption curves of consumers and the capacity of the technology have melded and merged quite so well,” - (Betsy Cohen, FTAC Chairman)