Payments firm Paya agrees $1.3bn deal to go public

October 2020 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

October 2020 Issue

Paya, a leading integrated payments and commerce solution provider, and FinTech Acquisition Corp. III, a special purpose acquisition company, announced they have entered into a definitive merger agreement.

Upon closing of the transaction, the combined company will operate as Paya and be listed on NASDAQ. The transaction reflects an implied enterprise value for the company of approximately $1.3bn. The merger is expected to close in the fourth quarter of 2020, pending FinTech III stockholder and regulatory approval.

Private equity firm GTCR is currently the majority owner of Paya and will remain its largest shareholder. Paya has more than 100,000 customers and partners, mostly small and medium-sized enterprises across the US and Canada, with software providers in markets that include B2B goods and services, healthcare, non-profit and faith-based organisations, utilities and education. The company was valued at $260m when purchased by GTCR in June 2017.

The cash component of the consideration will be funded by FinTech III’s cash in trust, as well as a private placement from various institutional investors, including Franklin Templeton and Wellington Management Company LLP, that will close concurrently with the merger. The balance of the consideration will consist of shares of common stock in the combined company. Existing Paya equity holders have the potential to receive an earnout of additional shares of common stock if certain stock price targets are met as set forth in the definitive merger agreement. Existing Paya equity holders, including GTCR and management, will remain the largest investors by rolling over significant equity into the combined company.

“We are excited to partner with FinTech III to accelerate our path to becoming a public company and greatly appreciate GTCR’s continued investment and support,” said Jeff Hack, chief executive of Paya. “Paya has a long and proven history of creating differentiated value for software integration partners and their end customers. We have reached this milestone thanks to a terrific roster of software partners, as well as our talented and dedicated Paya colleagues. As a publicly listed company, we will continue to invest in the product innovation and support our software partners rely on to meet the needs of their clients, as well as have access to capital for additional strategic acquisitions.”

“Integrating payment solutions with software is the fastest growing segment of the payments industry, and Paya is perfectly positioned as the partner of choice for sophisticated software providers and middle market business clients across multiple attractive verticals,” said Betsy Z. Cohen, chairman of FinTech III. “Jeff and his team have created innovative solutions that anticipate the needs of the market which provides a clear, strategic vision for accelerating growth at Paya.”

“This transaction is another great example of our Leaders Strategy approach and its ability to transform businesses in industries we know well like payments,” said Collin Roche, managing director at GTCR.

“Jeff and the leadership team have made the investments in technology and talent to build a differentiated integrated payments platform of scale in attractive end markets, and we are excited to continue supporting Paya in this next chapter of growth,” said Aaron Cohen, managing director at GTCR.

GTCR also exited another financial services firm in July when it agreed to divest its mortgage data firm Optimal Blue to Black Knight Inc. for $1.8bn.

Richard Summerfield