Déjà vu: Corsair expects experience growing Repay will pay off with new acquisition Aurora

"There is a void in the market for players like Aurora to grow and become acquisition or IPO targets,” said Corsair's Jeremy Schein.

One deal that caught our eye recently was Corsair Capital’s acquisition of Aurora Payments, announced January 4. Corsair invests in software and services in the financial services market and has a solid track record in the payments sector. PE Hub spoke with Jeremy Schein, partner and member of the buyouts investment committee at Corsair, and Brian Goudie, chief executive officer of Aurora, to find out more about opportunities in the payments sector.

The Aurora transaction builds on Corsair’s experience investing in and supporting growth at payments companies, including Repay, TreviPay, and Currencies Direct. Schein told PE Hub that there are a lot of parallels between what was done with Repay and what he hopes to do with Aurora.

“We invested in Repay a few years back which was very successful, and we envision the same thing for Aurora,” said Schein. In 2016, Corsair acquired a controlling interest in Repay from the existing institutional owner, and the founding shareholders remained part of the senior leadership team. In 2019, Repay was acquired by Thunder Bridge Acquisition, and began trading on the Nasdaq under “RPAY.” As part of the transaction, Corsair rolled over a significant portion of its Repay investment to become a minority shareholder in the combined company. In September of 2020, Corsair completed the sale of its remaining shareholding in Repay.

“We believe payments continues to be an incredibly exciting space and within that space there is technology and distribution and having the right platform to go out and buy and build internally,” Schein said. “Rounding out the tech and distribution is really a good opportunity.”

Founded in 2005, Aurora is a network of processing, technology, and payment services headquartered in Tempe, Arizona, with 22,000 merchants and $10 billion in annual processing. Aurora aims to offer a one-stop-shop solution for partners and merchants seeking to accept and receive electronic payments.
Previously backed by Goldman Sachs and Prudential Capital, Aurora wasn’t necessarily looking for a private equity investment.

“We were really just looking to refinance our debt, but this fell into our lap, and it turned out to be an incredible opportunity,” said Goudie, who will continue to lead Aurora and remain a shareholder. “Aurora has spent a lot of time and effort creating a horizontal payment platform the last few years. We are ready to transform the company and pivot our spend towards creating dynamic solutions for our clients and partners to transact with. Partnering with a forward-thinking company like Corsair was an easy call for Aurora.”

The payments space has been dominated by consolidation over recent years.

“There has obviously been a significant selloff broadly in the payments sector which we view as a positive,” said Schein. “As we look for M&A opportunities going forward, the selloff will allow us to find acquisition opportunities where we can partner with leading management teams who share a joint vision of where the payments industry is going.”

Schein added that there has been some “bar-belling” within the overall industry, with the very large and successful players having continued to grow and consolidate, which he believes has “left a gap in the mid-market for companies to go and buy smaller companies and partner with them to help them grow and realize their ultimate value.”

“The larger players are very focused on tech and M&A, and there aren’t enough players one level down for them to continue executing on those goals,” he said. “That’s why we think there is a void in the market for players like Aurora to grow and become acquisition or IPO targets.”

So why is the payments sector such a cash cow for PE and VC firms?

“Payments make good private equity deals, because the cash flows are fairly predictable, so you are able to have a pretty predictable amount of leverage for the transaction,” Schein said.

The space also benefits from being able to glean information from every consumer purchase, added Goudie. “Payments are so attractive because of the transactional data,” he said. “Knowing what consumers are spending money on, where they are spending money, when they are spending it – insights into cardholder and consumer habits and patterns – is very valuable for a lot of people.”

Corsair seeks to accelerate organic growth, enhance product and technology offerings and build on its history of successful acquisitions.

“Aurora has already begun to specialize and has verticals where there is a strong market share, and we expect to continue to invest in those spaces by buying tech and distribution businesses and building out the revenue base both organically and inorganically,” Schein said.