GTCR’s Worldpay deal shares traits with Paya carveout

With its recently announced acquisition of Worldpay from FIS, GTCR is running from a familiar playbook – and one it used previously to score with Paya.

Back in 2017, GTCR carved Paya out of The Sage Group (where it was called Sage Payment Solutions), hired a payments industry executive in 2018 to lead it, then took it public in 2020, and then Nuvei took it private in a $1.3 billion acquisition, which closed in February.

When GTCR bought Paya, its revenues were declining by 2 percent, recalled Aaron Cohen, managing director, head of financial services and technology at GTCR, in an interview with PE Hub.

At the time of the Nuvei deal announcement in January, revenue was growing by 15 percent, he said.

Now, Chicago-based GTCR is hoping some of that same magic will rub off on its new deal with Worldpay. GTCR is acquiring 55 percent of the Cincinnati-based company for $11.7 billion from FIS, a global payments service based in Jacksonville, Florida. FIS will retain a 45 percent stake in Worldpay. The deal values the company at $18.5 billion.

GTCR committed to an additional equity capital investment in Worldpay of up to $1.25 billion to pursue inorganic growth opportunities.

The Leaders Strategy

With both Paya and Worldpay, GTCR deployed its well-known approach of partnering with industry executives, known as The Leaders Strategy. The firm collaborates on a thesis or an area where it can find an attractive opportunity to invest in and then forms a platform company, and the management team ultimately leads and runs it.

With Paya, GTCR hired Jeff Hack, a former First Data executive.

With Worldpay, GTCR will name Charles Drucker CEO when the deal closes in the first quarter of 2024.

GTCR has a long history with Drucker, who served previously as the CEO of Worldpay. The firm looked at acquiring Worldpay when it was the payments processing unit of Fifth Third Bancorp. It was later spun off in 2009 and given the name Vantiv.

In 2010, GTCR sold integrated electronic payment service National Processing Company to Vantiv, which at the time was led by Drucker.

Later, Drucker led Vantiv’s merger with Worldpay in 2018. FIS bought Worldpay a year later, and in 2020, Drucker retired from the board of FIS.

“We’ve had tremendous admiration for Charles and wanted to find a way to work with him for a very long time,” Cohen said.

Work to do

The payment platform of Worldpay is standalone and separate from FIS already, so payment processing, and what customers and merchants see, is already separate from FIS.

The carveout mainly has to do with back office systems, accounting, legal and HR, according to Cohen. Those are all integrated by FIS at the moment.

“The challenge here is we do have to hire probably close to 1,000 people to stand up the finance function, an HR function, a legal function, and we’re going to be working in partnership with FIS to start hiring those people shortly,” Cohen added.

M&A ahead

The deal is split 50/50 in terms of debt financing and equity contributions from GTCR. “We wanted to have a modest amount of debt, so we can have a tremendous amount of free cash flow for Charles to reinvest in the business and for M&A,” Cohen told PE Hub.

Drucker will lead the company’s pursuit of add-on deals. Cohen said the add-on focus will primarily be companies that add new systems that help merchants accept payments, whether that entails new payment modalities, new systems to improve authorization rates, or to help Worldpay enter into new geographies.

Cohen said there are opportunities in the payment processing field. “There’s still a large cash-to-card conversion going on globally,” he added. “People are still paying with cash and other methods but are moving to card and electronic payments.”