San Francisco-based private equity firm Hellman & Friedman LLC announced on September 25th that it had agreed to acquire Nets A/S for 33.07 billion Danish Krone, or $5.3 billion. Hellman & Friedman is joining Singapore wealth fund GIC Pte Ltd. and funds managed by advent International Corp. and Bain Capital Ltd. (the latter two are already major shareholders in Nets). Hellman & Friedman has offered 165 Danish Krone per share for the company, which represents a 27% premium. Investors owning 46% of Nets have agreed to tender their shares.
Nets is a Copenhagen based payments company that helps merchants, banks, and corporations both accept and process credit, debit, and online payments in the Nordic region. With the additional capital from private-equity firms, the company is looking to further its growth by expanding into other markets. Nets saw a 6% rise in revenue over the first half of 2017, which was driven partly by the growth of the e-commerce sector and the company’s direct debit and electronic billing services. However, it’s capital expenditures grew from 8.2% to 9.3% of its revenue in the previous period, showing payments companies’ push towards investing in new technology.
Hellman & Friedman focuses on leveraged buyouts and growth capital investments in several core target industries, such as media, financial services, professional services, and information services. It seeks to make equity investments between $50 million and $1.2 billion in its portfolio companies and often prefers to invest alongside management teams in companies undergoing transitions.
Hellman & Friedman’s acquisition of Nets has followed a trend of consolidation in the payments-processing sector, as firms have been forced to cut costs, develop new products, and add customers amidst greater regulatory scrutiny and fiercer competition from technology startups. Similar deals have closed in the past few months; for example, in August, Blackstone and CVC Capital Partners acquired Paysafe Group PLC, a U.K. online payments processor, for $4 billion; and Vantiy Inc. acquired Worldpay Group PLC for $10 billion. Vista Equity Partners recently announced it would sell specific payment technologies to Global Payments Inc. – a payments-processing company based in Atlanta – for $1 billion; and Norid Capital Ltd. agreed in July to sell Stockholm-based payment-services firm Bambora for $1.79 billion to French company Ingenico Group.
These deals have highlighted firms’ eagerness to take advantage of the growing use of mobile device for payments, and the industry has been especially attractive to buyout funds, which are looking to benefit from a high frequency of deal activity as companies in the sector work to gain scale through acquisitions. As companies in the space compete with technology startups, this trend will likely continue to impact the payments-processing sector.