Deal in Focus: Advent, Bain buy German payment service Concardis

Previously owned by a syndicate of German private and co-operative lenders, Germany-based payments service Concardis was reported to have landed on the block in October 2016. At that time, Deutsche Bank and Commerzbank started leading an auction process, in which Advent International and Bain Capital Private Equity were understood to be the largest bidder with a joint offer.

In January 2017, the GPs acquired the business in a deal valuing the company’s equity at €700m, with Morgan Stanley, Goldman Sachs and HSBC providing an undisclosed credit facility estimated at 5.5x the company’s EBITDA, unquote” understands.

“It was a highly competitive process. There was a lot of interest in the asset because Concardis is one of the most visible bank-owned payments assets in the German market,” says Advent managing director Jeffrey Paduch. Currently, the company claims to process €41.9bn in payments, and in a statement reported a 6.6% yearly increase in revenues, up to €480m and €25m of EBIT in the fiscal year 2015.

During the last three years, the company made several strategic acquisitions, expanding its product offering and distribution network. Nonetheless, the new investors are now keen on providing board-level expertise and additional capital to execute already-identified bolt-on transactions and invest in innovation and infrastructure.

Paying off
The GPs started investing together in the payment sector in 2007. In Europe, Advent and Bain first acquired RBS Worldpay for £2.05bn EV in July 2010, marking the largest UK deal for almost three years, according to unquote" data. During the five-year holding period, the investors spent €1bn to develop the business and subsequently floated it with a £4.8bn market cap in the largest London IPO of 2015.

More recently, the buyout consortium backed Danish payment services provider Nets for DKK 17bn in March 2014 and listed it two years later, valued at DKK 30bn, in the largest PE-backed flotation in the Nordic region since 2010.

In 2015, Advent, Bain and Clessidra bought banking service provider ICBPI in a €2.15bn deal – the largest buyout in Italy since late 2007.

"While penetration of digital payments is high in some regions such as the Nordic countries, cash is still the prevalent method for payments in Germany and Italy," says Christophe Jacobs van Merlen, a managing director at Bain. "Those are now fast-growing markets and there are several drivers that underpin a market swap in the benefits of digital payment, such as a push from authorities to prevent a black economy; a change in habits from younger generations, who are more used to digital payments; and the growth of international tourism. For example, in Germany we have seen 9-10% market growth in digital payments in the last decade, and we think it will continue, if not accelerate."

If we … succeed in creating a DACH champion, there will be plenty of options for the future, either for a trade buyer or in the public markets" – Jeffrey Paduch, Advent International

Against this backdrop, "private equity appetite is increasing, as is the sophistication of processes, as transactions are becoming more complicated following technological improvements", adds van Merlen. "On the one hand, new and larger competitors enter the market, such as Google and Apple; on the other hand, some regulatory changes contribute in making due diligence more complicated." Nonetheless, this does not seem to represent a threat for van Merlen. "If a company is able to invest and innovate, there is an opportunity for us to help them," he says.

Says Paduch: "Over the coming decades, there will be further consolidation in the payments sector on a pan-European basis. For now, we are focused on working with management to build the business. If we go about that in the right way and succeed in creating a DACH champion, there will be plenty of options for the future, either for a trade buyer or in the public markets."

People
Bain Capital Private Equity – Christophe Jacobs van Merlen (managing director).
Advent International – Jeffrey Paduch (managing director).
Concardis – Marcus W Mosen (CEO).

Advisers
Equity – Corestar Partners (corporate finance); Weil Gotshal & Manges (legal).
Vendor – Deuthsce Bank (M&A); Commerzbank (M&A); Hogan Lovells International (legal).

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