Advent and Bain’s long battle for RBS WorldPay

The auction process led by UBS for RBS WorldPay was launched in November last year and received significant interest from private equity houses. WorldPay, formally known as Global Merchant Services, processes about half of all face-to-face debit and credit card payments in the UK. Initially the deal was estimated to be worth £2.5bn, making the final deal, which includes a £200m contingent consideration, worth significantly less than expected.

RBS was mandated to sell the division by a European Commission ruling, because the UK government owns a 70% stake in the bank following the financial crisis in late 2008. According to the ruling, RBS is allowed to keep a 20% stake in the division. The sale to Advent and Bain will see RBS retain a 19.9% stake in WorldPay, while the private equity investors split the remaining share evenly. RBS is rumoured to be making a profit of almost £900m from the deal.

A deal with private equity houses was not RBS's initial choice, as it was wary of their knowledge of the financial sector. However, with Advent and Bain having expertise in the sector, successfully managing previous investments and having experience in complex carve-outs, an agreement was reached. Examples of these deals include Advent's acquisition of Lloyds TSB Registrars in May 2007 and Bain and Advent's investment in FleetCor. The investors were able to fend off competition from groups such as Clayton Dublier & Rice; American Express and Permira; Atos Origin, CVC Capital Partners and Welsh Carson Anderson & Stowe; and TPG.

While many large buyouts have faltered due to difficulties in acquiring leverage to support transactions, WorldPay's business model enabled the investors to assemble a debt syndicate. The stable cash stream that the division generates is well suited to pay off any leverage used. The amount of debt used for the transaction was not disclosed, however leverage was provided by RBS, Barclays, Goldman Sachs, Morgan Stanley and UBS.

Following the acquisition, the investors will make new investments in WorldPay's technology and support product development in order to strengthen and grow the company. The deal is subject to approval of regulatory bodies and is expected to be completed in the fourth quarter.

Full details on all aspects of this transaction can be found here.

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