Merchant e-Solutions Auction Is Busted…But Maybe Not

When is a deal busted? That’s the thought passing through several PE and banking executives when they talk about Merchant e-Solutions.

Merchant, a payment processor backed by Trident Capital, has been up for sale since fall 2010 (October to be exact). But it’s been months now and the auction has gone radio silent. In fact, several PE and banking executives say the auction is busted.

“Processes, if they’re done properly, shouldn’t take more than eight weeks,” one banker says. “It’s busted by now.”

“Everyone has heard that it’s busted,” another banker says.

“I haven’t heard anything so I assume that to be the case,” a PE exec adds.

Several sources blamed the high valuations sought by Sharif Bayyari, Merchant e-Solutions CEO. The payment processor has roughly $40 to $45 million EBITDA and was seeking bids of 15X, sources said. Bayyari is majority owner of Merchant e-Solutions, a source says.

“Sharif definitely knows how to build a business but the growth of the company is nothing spectacular,” the first banker says. “He’s a terrific CEO but his valuation expectations have always been outlandish.”

Another banker says Bayyari did lower his expectations and was looking at bids below 15x. “These are still fairly rich numbers but certainly below the 15x,” the source says.

The same banker says it’s too soon to say the deal is dead. In December, I reported that the company had drawn interest from Global Payments and Intuit. Cielo, the Brazilian payment processor, was also looking at Merchant e-Solutions, sources told me. The auction has been written off before and then it comes back, the person says.

If it is dead, the auction will go the way of First American Payment Systems. Last fall, First American, which is owned by Lindsay Goldberg, went up for sale. The company had about $50 million EBITDA and was seeking bids of 12x, sources told me at the time. Several PE firms put in proposals but nearly a dozen prospective bidders walked away from the deal after conducting due diligence, sources said. First American wasn’t worth such a high valuation, they said.

The company instead completed a dividend refinancing, which included a $135 million payment to shareholders.

Calls to Merchant e-Solutions and Trident were not returned.