This posting from the European Commission (EC) website provides a summary of the conditional approval given to Mastercard for the acquisition of Nets, the Denmark-based payment solutions provider. The EC’s concerns centered around potential competitive issues in the European Economic Area (EEA) regarding managed solutions for account-to-account core infrastructure services (A2A CIS). The initial deal for $3.2 billion was announced about a year ago, but it has taken some time to close due to the EC’s issues with competition.
Here’s more from the article:
‘Executive Vice-President Margrethe Vestager, responsible for competition policy, said: “Companies and citizens seek competitive and innovative payment solutions for their banking transactions. This merger, as originally notified, would have significantly reduced competition in the market for account-to-account core infrastructure services and undermined the development of new real-time payment solutions, which are becoming increasingly important. Today’s decision ensures that effective competition is preserved and facilitates the emergence of a new provider of real-time payment infrastructure services in the European Economic Area“. ‘
Mastercard has been in an acquisition mode in recent years to boost non-card capabilities in infrastructure and networks in account-to-account services. Nets is primarily a Nordic solution, but of course the platform infrastructure can be extended to other regions eventually. The basic solution to the EC’s A2A CIS competition problem was for Mastercard and Nets to agree to transfer a global license to distribute, supply, sell, develop, modify, upgrade, or otherwise use Nets’ Realtime 24/7 technology, which would go to a suitable business.
The receiving business would have exclusive technology license rights in the EEA and non-exclusive rights elsewhere. The transfer includes personnel and services necessary to provide managed services. It is not clear whether this agreed solution changes the original price of the acquisition.
‘The proposed commitments fully address the Commission’s competition concerns, as they will increase competition in the market for the provision of A2A CIS as managed services in the EEA, by allowing a new player to effectively and credibly compete in this space….The Commission therefore concluded that the proposed transaction, as modified by the commitments, no longer raises competition concerns in the EEA. The decision is conditional upon full compliance with the commitments.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group