Case study 1
Payments unit carve-out
Objective
PSE was engaged by a private equity firm to conduct due diligence for its potential purchase of a fintech being carved out from a major European retailer. PSE’s task was to evaluate and report on the target’s technical, operational, strategic and commercial processes.
Approach
Based on its expertise, extensive discussions with the target’s management team and a review of technical and commercial documentation, PSE produced six reports within a tight deadline:
- SWOT analysis, competitor assessment and reviews of technology architecture, operational services and commercial model
- Detailed analysis of the operational model and back-office processes
- Detailed analysis of EU T3/T4 SME opportunities, routes to market and the target’s business case
- Evaluation of the target’s technical, operational and back-office IT processes and identification of areas for automation, change and improvement
- Assessment of a gateway provider as a potential partner for the target, or alternatively as an acquisition target in its own right
- Review of operational and technological development, examination of capacity to expand and deliver new services, and assessment of business continuity plans and capabilities
Result
Following delivery of the due diligence reports by PSE, the private equity firm was satisfied with the soundness of its investment plans. The acquisition, worth €300 million, was announced one month after PSE delivered its final report.
Case study 2
Digital wallet buy-side due diligence
Objective
To support a PE bid team in evaluating the e-wallet business, as well as providing market knowledge and input into the initial bid preparation for the sale of the asset.
Approach
PSE undertook detailed analysis of the prospectus under the PE firm’s direction, with a brief to examine specific aspects of the business. The analysis focused on:
- An assessment of the credibility of the five-year vision and the capability of the management team to reposition the business and achieve the targets set
- An overview of the end-to-end business selling, marketing, operational development and delivery models, including recent acquisitions, as could best be assessed from the prospectus
- A review of the current product offering and its fit within the payments landscape, plus an overview of key product gaps and service/product opportunities
- A review of competitors and an assessment of the asset’s ability to compete against major players, retain customers and minimise attrition
- An assessment of the fit between current marketing and selling capabilities and those required to exploit the opportunities highlighted within the forward plan, including opportunities for partnerships, JVs and M&A
- An overview of the potential EU and domestic market regulatory challenges facing the asset and the verticals in which it operates
- Suggestions for innovation and new products as a means of extending the product portfolio, diversification and repositioning
- A review of critical success factors, key enablers, inhibitors, risks, risk mitigation, resources and skills
- An overview and high-level modelling of the financials and customer growth to assess their credibility
Result
The PE firm incorporated PSE’s commercial due diligence into its strategic approach to the asset.
Case study 3
Private equity investment in payments carve-out
Objective
Assist a private equity company in assessing the opportunity to invest in one of Europe’s largest supermarket groups, which was planning to carve out its internal payments company and associated operational functions.
Approach
PSE assessed the payments division, looking at the operational model and services. This covered acquiring, issuing, onboarding, support, risk and back-office operations. PSE also assessed the IT platform, looking at functionality, capacity, resilience and future development capability.
The carve-out vision was to leverage private equity funding to enable the independent payments company to become a commercial processor and card scheme issuer/acquirer offering services to larger merchants, as well as continuing to support the Group. The Group had invested heavily in building a highly sophisticated multi-country omnichannel acceptance service, as well as acquiring, issuing and ATM operations.
Result
PSE gave an overall positive assessment while also highlighting areas where the payments division fell short of best practice and recommending organisational, operational and platform changes to move towards a market-leading position. Based on PSE’s report and recommendations, the PE investment went ahead and the now independent company continues to grow successfully.
