Strategic Advisory in Payments
& Payments Technology

The Most Valuable Merchant Portfolio

What a useful academic exercise it would be to cobble together the perfect portfolio: the one to which all other merchant portfolios aspire. A variation of this exercise is commonly performed through “benchmarking,” an analysis of a subject merchant portfolio as compared with a premium book which is known to have carried a top valuation in the marketplace. Benchmarking is a highly effective tool for owners interested in maximizing the value of their merchant portfolios. It can show them where their portfolios are strongest and where they need improvement, as related to valuation.

But what if we were to indulge in this academic endeavor and build the perfect, most valuable portfolio? Where would we start? First, we would need to identify the top drivers of value in merchant portfolio sales. Second, we would need to know that for each of these drivers, there exists what the marketplace perceives to be the optimal range, value, type or level.

Here are the six top drivers of merchant portfolio value in today’s marketplace:

However, in a portfolio where a certain industry vertical has been penetrated, and consequently, a material concentration of that business type exists in the portfolio, that book will be perceived as being more valuable than a portfolio with an across-the-board admixture. Niche vertical penetration suggests there’s something there beyond the payment processing, often some form of business management solution or POS technology, or specialized knowledge about a certain type of merchant. In both instances, this usually translates into “stickier” merchants, and this has a lot of value to would-be buyers.