The hunger for payment services businesses among private equity firms shows no sign of abating, as buyout house Equistone today bought UK-headquartered Small World Financial Services for around £80m.
Fellow private equity houses FPE Capital and MMC Ventures sold their stake to Equistone – for FPE, the deal generated three times the £12m it had invested as growth capital.
The deal shows financial buyers such as Equistone are still willing to cough up a premium for payments business. Small World's adviser Canaccord Genuity was also running an initial public offering (IPO) process as well as looking for buyers, but Equistone was able to steal the upper hand.
"Demand for cross-border payments is increasing due to macro-demographic trends, and Small World's high-quality customer proposition and scalable business model position it to achieve further organic and acquisitive growth," said Equistone's Andrew Backen.
Last year, Inflexion's investment in card services firm Radius valued the business at £800m, while London-based fintech investor Anacap has scooped up e-commerce specialist Heidelpay and giants Advent International and Bain Capital have a string of deals in the sector under their belts including Worldpay, Nets, ICBPI and Concardis.
Meanwhile FPE has been cashing in on the payments demand, as Small World represents its second exit in the sector in two months following the sale of Creditcall which generated 4.2 times invested money.
Under FPE's hold, Small World grew revenues by five times to more than £110m last year.
The business has a tech platform which allows customers to send money across the world cheaply and securely. Alongside its digital services, it has a physical network of more than 6,000 third-party send-side agents and 80 branches.
It hopes to use the Equistone funding to help develop its new app while hoovering up smaller competitors to expand.
Behind the deal
Sunil Duggal, managing director at Canaccord Genuity
- The aborted merger between Rathbones and Smith and Williamson was one headline deal which Duggal worked on last year, but he has been busy since. Small World is his second deal in just a few months, following the sale of Rockspring Property Investment Managers to Patrizia Asset Management.
- Developing a strong name for himself in the lucrative payments space, Duggal has also advised on the sale of Moneycorp to Bridgepoint and on the acquisition of Currencies Direct by Palamon and Corsair.
- All hobbies outside of work have currently been thrown up in the air, according to Duggal, as he tries to juggle his busy practice with spending time with his two young sons.
- David Tyrrell and Bilal Rana also worked on the Canaccord team, pursuing both an IPO and an outright sale.