Companies in the latest fintech megamerger are already eyeing future growth opportunities.
Global Payments Inc. will combine with Total System Services Inc., commonly called TSYS, in an all-stock merger valued at about $21.5 billion. It is the third megamerger announced in 2019 that will join two companies in related payments businesses to form one omnichannel solution. On a call to discuss the deal, executives said the scale provided by the merger will put the combined company in the right position for future growth.
"The deal significantly enhances our combined financial strength and flexibility to further expose us to faster-growth geographies and will enable us to remain competitive among our peers amid the [constantly] changing dynamics of our industry," said TSYS Chairman, President and CEO M. Troy Woods, who will become the combined company's chairman. "This was simply the right time with the right partner to form this merger."
Although the two companies have significant overlap in their merchant businesses in the U.S., the two differ in some business segments and geographies around the world. The merger will give each company access to the other's foothold in those markets.
Global Payments CEO Jeffrey Sloan said the merger provides Global Payments with exposure to both business-to-business and peer-to-peer payments, neither of which the company operates today. Sloan will be CEO of the combined company.
Sloan also highlighted the potential to cross-sell products in new markets. Global Payments can make introductions to large financial institutions in the Asia-Pacific region, where TSYS has historically been underrepresented. TSYS can likewise make introductions in Western Europe, Sloan said.
The companies expect to find at least $100 million in revenue synergies from the merger.
Global Payments will gain exposure to faster-growth geographies, particularly in Latin America, where TSYS already operates a card-issuing software called Prism, Sloan said. Global Payments currently does not have operations in the region, which is becoming a key battleground for payments companies. The tie-up also opens up future acquisition opportunities, especially in Europe and Latin America, where Sloan said card issuing and merchant acquiring tend to be combined into a single business.
Executives stressed that they wanted the companies to be integrated quickly, so they can soon be positioned for possible future investments.
"The overall structure of the transaction was designed to provide significant capacity to invest for growth," said Global Payments CFO Cameron Bready. He will become the combined company's president and COO. "We do not want to spend the next five years integrating our businesses."
The companies anticipate most integration actions will begin within the first 18 months following the close of the transaction, which is expected to be in the fourth quarter.
The two companies expect to find $300 million in expenses that can be cut, evenly distributed in four areas: overlapping business operations from their respective merchant businesses in the U.S., the combination of technology platforms, reductions in corporate overhead, and traditional operating savings from customer service.