Bregal Sagemount is said to reap more than 3x on NMI sale

Bregal Sagemount more than tripled its money with the sale of Network Merchants Inc, or NMI, to Francisco Partners, a source said.

The San Francisco PE firm said Sept. 7 that it acquired a majority of NMI. Terms of the deal, which has closed, weren’t announced. Bregal Sagemount sold its holding, while Great Hill Partners remained as a significant minority shareholder. The transaction was valued at $425 million to $450 million, a source said.

Founded in 2001, NMI builds e-commerce payment gateways for customers on a “white-label basis,” a second person said. NMI is “sneakily large” and powers many websites without disclosing its role in providing the gateway infrastructure, the second person said.

NMI, Roselle, Illinois, doesn’t identify its customers. Peter Christodoulo, a Francisco partner, said in a statement that NMI provides “critical payment functionality for over 1,000 affiliates and 100,000 merchants.”

Bregal is a New York private equity firm that makes growth investments. It will take both minority or majority positions. Bregal typically invests $8 million to $150 million equity per deal.

Bregal’s investment in NMI dates to 2013 in a deal that valued the company at $200 million, a statement then said. A year later, in 2014, Great Hill invested. Bregal will make more than 3x its investment with the sale to Francisco, the first source said.

Bregal used its first fund, which collected $500 million in 2012, to invest in NMI. Earlier this year, the firm closed its second fund with $960 million of commitments.

For Francisco, NMI is its first platform investment in a payments company in three years. (Avangate, a portfolio company, acquired 2Checkout in April but this was an add-on.) Francisco invested in PayLease in June 2014.

The technology-focused PE firm has produced some major fintech exits this year.

In June, Francisco sold PayLease to Vista Equity Partners. Vista paid $300 million to $350 million, Buyouts reported. Vantiv in May also agreed to buy Paymetric in a $525 million deal, Buyouts said. Francisco made more than 6x its money with the Paymetric sale, the second source said.

Francisco is expected to be out fundraising for its fifth buyout pool later this year, Bloomberg reported in May. Francisco is seeking more than $3 billion and plans to begin marketing in Q4, the story said.

NMI turned to Steve McLaughlin of FT Partners to advise on the investments from Bregal, Great Hill and the current sale to Francisco. Goodwin Procter LLP provided legal advice to NMI in the deal with Francisco. Dan Daul of William Blair advised Francisco and Kirkland & Ellis LLP acted as their attorney.

Executives for Great Hill and NMI could not be reached for comment.

Action Item: To contact Peter Christodoulo, a Francisco partner, call him at (415) 418-2900

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