Private equity is losing the battle for Hyperwallet Systems Inc, five sources said.
A strategic has offered $400 million for Hyperwallet, beating out lower bids from PE, two sources said. PE firms topped out at $325 million for Hyperwallet, one said.
Six PE firms are out of the auction, another source said. One of the PE firms that didn’t advance said Hyperwallet had “a lot of interest at a very high valuation.”
It’s unclear which strategic is buying Hyperwallet. PayPal earlier this month acquired iZettle, a Swedish payments startup, for $2.2 billion.
“PE was blown out by price,” a source said of the competition for Hyperwallet. “This is a strategic deal.”
Hyperwallet, the Vancouver payments provider, supplies B2C and peer-to-peer services for corporations and financial institutions.
It also offers cross-border payments, foreign-exchange-payment services and prepaid card payments, PitchBook said. Customers include Karrot, Expedia and Lyric Financial.
In 2014, Primus Capital and Bratenahl Capital Partners invested in Hyperwallet. It’s unclear how much they provided.
Hyperwallet went up for sale earlier this year; Raymond James is advising on the process, sources said. The investment bank also advised Hyperwallet in 2014 when Primus invested.
A sale to a strategic would be the latest in the payments sector. Cash-rich corporate buyers have scooped up several companies.
TSYS in January closed its $1.05 billion acquisition of Cayan. Parthenon Capital Partners was the seller. First Data bought BluePay in December for $760 million and, in July, it acquired CardConnect for $750 million. TA Associates sold BluePay, while FTV Capital was an investor of CardConnect.
In January, Vantiv closed its $10 billion acquisition of WorldPay, which was owned by Bain Capital and Advent International until its 2015 IPO. Vantiv also bought Paymetric from Francisco Partners for about $525 million in 2017.
Primus, Woodmere, Ohio, is a growth-equity firm that invests in healthcare, software and technology-enabled-services companies. The firm’s eighth fund closed on $540 million last year, Preqin said. The firm’s seventh fund raised $353 million in 2013.
Bratenahl, of Cleveland, is a PE firm. Bratenahl doesn’t have a specific time horizon on when to exit a deal but will look for a return within five years, the firm’s website said.
Bratenahl makes co- and direct PE investments in companies. The firm typically invests from $500,000 to $15 million per deal. The firm also makes PE fund investments, which can include independent sponsors and small and mid-market funds.
Hyperwallet, Primus and Bartenahl could not be reached for comment.
Action Item: Contact Hyperwallet CEO Brent Warrington at +1 877-258-5150