Selling Your Merchant Portfolio: Finding A Buyer That’s Right For You
Experienced buyers of merchant portfolios know exactly what they are looking for in an acquisition. As such, they’re not interested in evaluating portfolio properties whose attributes do not align well with their acquisition criteria. But what about sellers of merchant portfolios? Should not sellers also know what particulars make one buyer a better fit than another?
If we assume that most sellers are going to market with purpose, we should also assume that most sellers have a time frame in mind to complete a transaction. As such, it behooves a seller to market their merchant portfolio to a buyer or buyers who at least upon a cursory examination would seem to be a good fit. Time is money after all.
Thus it is important to for a seller to have thought about and come up with a checklist of minimum criteria that the buyer or buyers they enter into discussions with must match-up with. Here are some of the factors that a seller (you) should consider for your checklist:
1) Is the buyer looking to acquire merchant portfolios or merchant residuals: A lot of buyers in the market speak of the term “portfolio” very loosely, and use it interchangeably when referring to both a true portfolio and a residual stream. Make sure you have a clear understanding of what the buyer is actually looking for so you don’t waste your time.
2) Is the buyer looking to acquire merchant portfolios on a certain processing platform: Most buyers of merchant portfolios are looking to acquire books that are processing on the same platform as their existing book. For example, buyers who process with Fiserv are (generally) looking for other Fiserv portfolios.
3) What “size” merchant portfolio is the buyer looking to acquire: I put size in quotes because it generally can mean any and/or all of 3 different metrics: size in terms of the number of merchants in the book, net monthly processing residual, and/or actual dollar amount the buyer is looking to spend on the acquisition. You should ask the buyer to address all 3.
4) Is the buyer funded: No sense in “dancing the dance” with a prospective buyer if they don’t have the appropriate capital available to make the acquisition. A lot of sellers are uncomfortable about asking a buyer about their funding ability. Don’t be! It’s a fair question to ask any potential suitor right from the get-go.
5) Is the buyer looking for you to come on board and write new business with them: If you’re selling because you’re getting out of the acquiring game, a buyer who conditions his/her acquisition on seller writing new business on their contract post-closing is a non-starter. Know what a buyer’s expectations of you are in this regard.
6) Does the buyer have a transaction history of making merchant portfolio acquisitions: This is not to say that a first time buyer isn’t a good fit, however, a proven and experienced buyer is generally a lot easier to work with. They’re typically well-funded and can move very quickly towards getting a transaction completed. If seller has to walk a buyer through the deal process (NDA, due diligence request, letter of intent, asset purchase agreement, etc.), the chances of a having a timely and successful transaction diminish substantially.