Payment industry M&A deals have occurred regularly in recent years and not typically viewed as a surprise. But today’s Fiserv-First Data announcement spun more than just a few heads. We queried Mercator Advisor Group analyst team for some at-first-glance thoughts and reactions.
First and foremost, the combined duo create a payments services behemoth that will be highly complementary with few overlapping service areas. Fiserv provides robust technology platforms to financial institutions whereas First Data drives the largest merchant-facing set of acquiring and commerce solutions to global markets. One major overlap presents itself with each firm’s debit network—Fiserv’s Accel and First Data’s STAR. Look for this area to offer consolidation opportunities.
Cross-selling of services is always a benefit of these large merchants, but can be easier said than done due to coordination among different organizations throughout both companies. This also brings to mind the synergy question that can make or break a corporate marriage. First Data is an active joint venture partner with mega merchant services banks such as Citi, Wells Fargo, and Bank of America. How this co-exists with Fiserv’s client base heavily represented by community banks and credit unions will bear watching.
Keep in mind that this is not a done deal, as there are the obligatory gauntlet of regulatory agencies that will have their say to make or break a corporate union of this kind. Or sometimes regulators attach conditions to mergers that include spinning off certain operating units. Also not out of the question is—will another suitor come forward and top Fiserv’s offer? Watch this closely in the upcoming days.
For now, there are many more questions left to be answered. But a key challenge will be how the rationalized management and staff structure will execute the merger, and then deliver on the anticipated benefits and gains for clients including financial institutions and merchants. This will be a long-term process and measured in years, not weeks and months.
Mercator will offering additional insight and commentary on this major payments industry development as it unfolds.