Fintech
Is Nuvei’s Go-Private deal a harbinger of things to come?
The FinTech landscape could be changed by go-private deals, as private equity firms and other companies find value in this space – and where, arguably, valuations do not reflect the potential of changes in payments processing, and particularly in acceptance of payments.
Nuvei stands out as, in April, the Canadian fintech announced a $6.3 billion deal with private equity firm Advent International following weeks of media reports that the company was in the midst of takeover talks.
To this end, and as detailed in a Tuesday (14 May) proxy filing, Nuvei advised shareholders to vote in favor of the go-private deal at the June 14 meeting to be held for that purpose. The $34 cash consideration was called an “attractive premium” equal to 56% of the company’s share price in mid-March, before media reports of a pending deal.
The deal, according to the document, is “in the best interests of the company… and represents an increase of approximately 42% over the consideration initially proposed by Advent.”
The reading here, we note, is that a) Advent was willing to pay and b) Nuvei sees more opportunity operating in private hands, perhaps, than it might see operating as a publicly traded company. In the latter case, companies are priced to market every day, and each trading day on the stock exchange can be, and often is, volatile.
By the numbers
In a separate Securities and Exchange Commission (SEC). archiving, we see that, in its valuation analysis, TD Bank has estimated a CAGR growth rate of 16% for the next five years for Nuvei’s revenues, with a slightly higher CAGR for adjusted EBITDA (often used by investors as free cash flow proxy) . Interestingly, according to other forecasts contained in TD reports, the B2B, government and ISV segment is expected to have an even more accelerated growth rate, with a CAGR of 24% in the coming years.
Overall, Nuvei enables partner companies to offer all types of online payments in their end markets. According to the company websiteNuvei allows 700 payment methods in 150 currencies.
Nuvei’s path from initial public offering (IPO) to going private may offer hopeful signs for members of the FinTech IPO Index who have also been looking to transform payments. As of this writing, the index is up 6%, but as we can see below, only five companies are trading above the offering price. Many companies trade as much as 90% below their IPOs. The overall index is trading up 6% year to date, significantly below the roughly 10% gains of the Nasdaq and S&P 500 stock indexes.
Valuation metrics show that the price-to-sales ratio for the group is around 3x, lower than the Nasdaq’s 5.2, but many of these companies are growing sales faster than other tech companies and the market capitalization is in average of approximately 153 million dollars. On this last point, the companies would apparently be “easy” to digest for a private buyer. Standard and poor estimated late last year that private equity firms have about $2.6 trillion of “dry powder” on their books.
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