While fintechs for years have been invading legacy processors' turf, Worldpay's new owners contend incumbency has its advantages — and that older firms can still respond quickly to digital trends.
By taking Worldpay private and removing it from the glare of the stock market, GTCR says it can help Worldpay accelerate research and development. It also plans to use Worldpay's status as an established payments company to ward off challenges from fintechs, and may pick up fintechs in the merger and acquisition market.
"We think Worldpay can innovate faster under this model," said Collin Roche, co-CEO and managing director of GTCR. "Worldpay is a market leader with scale, geographic coverage and a number of clients ranging from the smallest to the largest merchants in the world. It's a material player in this marketplace."
Worldpay became part of FIS during a
The more established companies spent tens of billions of dollars on the deals partly to counter Stripe, PayPal, Square and dozens of other upstarts that offer low-cost payment acceptance with lower overhead. These rival fintechs originally focused on enabling digital payments and card acceptance for small businesses, but have broadened their target markets to include larger clients and added more merchant and financial services.
GTCR is in effect resetting Worldpay. Former Worldpay CEO Charles Drucker will be Worldpay's new CEO under GTCR's ownership, and the terms of the FIS deal set aside up to $1.25 billion for Worldpay for inorganic growth, or future acquisitions.
"It's getting back to what the company was before," Roche said. "There will be a focus on growing innovation."
As an independent and private company, Worldpay can use its existing scale and GTCR's experience in the payments industry to develop new use cases for
"Delivering scale and developing for a diverse group of clients is hard. You can't do that kind of innovation overnight," Roche said.
As part of the deal, FIS received $11.7 billion to pay its debt faster. FIS cut about
The $18.5 billion price GTCR paid for Worldpay was about $1.8 billion below Wall Street analysts' projections for the sale, though Cristopher Kennedy, an analyst at William Blair, said the valuation is reasonable, given Worldpay's historical performance and comparison to industry peers. Additionally, Kennedy noted that FIS incurred a $17.6 billion impairment charge for Worldpay, which it acquired for $43 billion in 2019.
GTCR has been active in the payments industry for years. Its past investments include Paya, NPC (which was sold to Worldpay's predecessor Vantiv in 2010; Charles Drucker was Vantiv's CEO), VeriFone, Skylight, Fundtech and TransFirst. GTCR also acquired Wells Fargo Asset Management (now Allspring Global Investments) in 2021.
Worldpay will now have the capital and capacity to pursue more M&A, which management views as a catalyst for the growth of the business, Kennedy said. Since the Worldpay merger, FIS made one acquisition within the merchant solutions segment, Kennedy said, referring to a 2022 deal to acquire payment facilitator Payrix. FIS' large global acquiring peers have completed approximately 12 acquisitions each, on average, Kennedy said.
"On the heritage FIS side, we believe that management will be more focused on its core base of financial institutions, and capturing the opportunities associated with embedded finance and B2B payments," Kennedy said.
And GTCR can now expand its own M&A strategy, according to Kennedy, noting GTCR's history within the fintech and payments vertical.
"Worldpay may become more competitive in the market given the increased management focus and the growth of its product set and distribution through mergers and internal innovation," Kennedy said. "Following the acquisition of Payrix, Worldpay has been very focused on leveraging its e-commerce platform within the small to medium business market."
