Arsenal Capital Partners may get to exit FrontStream Payments after more than four years.
Arsenal, which owns a majority of FrontStream, is putting the company up for sale, three sources said. FT Partners is advising on the process, one of the persons said. However, it is unclear if the auction has officially started. FrontStream has spoken to investors but books have not gone out, sources said.
Washington, D.C.-based FrontStream is a payment processor for nonprofits. The company also provides software for the 501(c)(3) charitable marketplace. FrontStream is looking to sell for a “big multiple,” or more than 14x EBITDA, one banker said. Because it also offers software, FrontStream may argue that it should be valued based on a revenue multiple and not EBITDA, a different source said. It is unclear how much revenue FrontStream produces.
Strategics such as Vantiv, Global Payments and Heartland Payment Systems have been active in the space. (Vantiv acquired Mercury Payment Systems for $1.65 billion in June.) Several PE firms, including GTCR, TA Associates, Welsh, Carson, Anderson & Stowe and FTV Capital, also focus on fintech.
Arsenal’s investment in FrontStream dates back to March 2010 when the payment processor acquired Fast Transact. Arsenal provided the funds for the acquisition, a statement from that time said. In 2008, FrontStream also raised $16 million in funding from firms including SSM Partners, Noro-Moseley Partners, Wakefield Group and Southpoint Capital Advisors.
Arsenal, a lower mid-market firm, closed its third fund at $875 million in April 2013. Arsenal Fund II collected $500 million in 2006. With Fund III, Arsenal decided to no longer invest in financial services, peHUB has reported.
Fund II is generating an 18.7 percent net IRR as of Sept. 30, 2013, according to the Regents of the University of California.
FrontStream, in the past year, has been acquisitive. The company acquired GiftWorks, a provider of fundraising and management tools for nonprofits, in August 2013. Also that month, FrontStream bought Artez Interactive, a fundraising services provider. This year, FrontStream acquired Truist, which supplies corporate philanthropy technology.
Executives at Arsenal and Wakefield declined comment. FrontStream, SSM, Noro-Moseley and FT Partners did not reply to requests for comment.
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