Novacap, Caisse de dépôt back Pivotal Payments in $525 mln deal

Novacap has closed the largest technology deal in the firm’s 35-year history, teaming up with Caisse de dépôt et placement du Québec to back a payment processing company.

Novacap and the Caisse today announced their investment in Pivotal Payments, a payment and merchant services specialist based in Montréal. The deal values the business at about $525 million.

As a result, the two investors hold a majority stake in the company, Novacap President and Managing Partner Pascal Tremblay told PE Hub Canada. He added the deal nonetheless reflects a “true partnership” with management and especially Pivotal’s chief executive, Philip Fayer.

“Phil knows the payments space,” Tremblay said. “And he’s using that knowledge to build a multi-billion dollar business. We plan to supply him with the deep pockets needed to move forward.”

Pivotal provides a range of tech-driven payment acceptance solutions, including card-not-present, point-of-sale and mobile payments. Founded in 2003 by Fayer, it initially focused on small and mid-sized merchants but later expanded to also serve large corporations, chains and franchises.

The company quickly became a global platform. Part of this resulted from buying other businesses doing the same work. Since inception, Pivotal has made more than 20 acquisitions, half of them strategic in nature, Tremblay said. This activity contributed to sustained annual growth of about 20 percent, Pivotal reports.

Pivotal today operates across North America and Europe, serving more than 50,000 merchants and processing more than US$14 billion in transactions every year.

Pivotal reportedly bootstrapped its growth early on. In 2006, it partnered with Goldman Sachs to help fund the acquisition program.

The new partnership with Novacap and the Caisse will lend the additional heft required for an ambitious next phase of global growth, Tremblay said. Pivotal’s strategy will show continued emphasis of add-ons as well as expansion into new markets.

Acquisition targets will include payment-enabled software companies, core processing companies and independent software vendors, Tremblay said. These will mostly be mature entities, though Pivotal may also find opportunities in the emerging fintech startup ecosystem.

Debut investment

In addition to being Novacap’s largest tech deal to date, Pivotal is the debut investment of Novacap TMT V, which closed earlier in 2017. The fund, which invests in Canadian and U.S. mid-market technology, media and telecom companies, raised $840 million, 40 percent more than its original goal.

This war chest proved essential to the Pivotal deal, as it gave Novacap “increased capacity,” Tremblay said.

Fund V also recruited a bigger and more diversified investor group, adding to Novacap’s co-investment resources. Limited partners likely include the Caisse. The $271-billion pension fund has backed every previous Novacap fund and often assumes the role of syndicate partner.

Global fintech companies have recently attracted record sums from private equity and venture capital firms. Using CB Insights data, Accenture reports 56 percent per-annum growth in sector investment over the past five years, with dollar flows hitting US$23.2 billion in 2016.

Canada has reflected this trend, with fintech accounting for an increased volume of PE-VC deals. They include this year’s largest deal, Vista Equity Partners’ $4.8 billion acquisition of DH Corp.

Photo of credit cards courtesy of creisinger/iStock/Getty Images

Photo of Pascal Tremblay courtesy of Novacap.