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Fiserv buying First Data in $22 billion deal to create fintech giant

Financial services powerhouses joining forces

In recent years, Fiserv has shifted its business focus a bit, acquiring two businesses: Monitise, a London-based provider of financial services technology, and PCLender, a provider of internet-based mortgage solutions for community banks and credit unions. At the same time, the company sold off a majority share in its mortgage servicing business to Warburg Pincus.

But all of that pales in comparison to Fiserv’s latest deal.

Fiserv announced Wednesday that it is acquiring payments giant First Data in a $22 billion deal that will create a fintech monolith.

First Data offers a number of payment solutions for businesses, including the popular Clover point-of-sale system for small businesses. According to the company, First Data currently serves approximately 6 million business locations and 4,000 financial institutions in more than 100 countries around the world. The company’s products process more than 3,000 transactions per second and $2.4 trillion per year.

And now, the company is joining forces with Fiserv.

Under the terms of the deal, First Data shareholders will receive 0.303 Fiserv shares for each share of First Data common stock they own, for a total equity value of $22 billion.

That's a premium of 29% on the company’s stock. Following the close of the deal, Fiserv shareholders will own 57.5% of the combined company, while First Data shareholders will own 42.5%.

Upon completion of the deal, Jeffery Yabuki, current Fiserv president and chief executive officer, will serve as CEO and chairman of the board of directors of the combined company. Frank Bisignano, current chairman and CEO of First Data, will take on the role of president and chief operating officer for the combined company, which will carry the Fiserv name.

“Through this transformative combination, we expect to redefine the manner in which people and institutions move money and information,” Yabuki said. “We admire First Data for its excellence in merchant acquiring and global issuing services, and the tremendous progress they have made under Frank’s leadership. We expect this combination to catalyze and support an enhanced value proposition for our collective clients and their customers.”

The companies expect the deal to generate “approximately $900 million of run-rate cost savings and at least $500 million of revenue synergies, leading to enhanced revenue growth from expanded capabilities.”

The companies also list several expected benefits for clients from the deal, including:

  • Differentiated Financial Services Platform: With an even more extensive range of end-to-end solutions, the combined company expects to create additional value for account processing clients and deepen relationships. Fiserv and First Data will link their respective merchant and cash management capabilities, further developing new offerings and providing First Data’s Clover cloud-based platforms for small and medium-sized businesses. For example, First Data’s digital merchant account enrollment capabilities can be integrated into Fiserv’s digital banking solutions that serve thousands of financial institutions.
  • Enhanced Payments Capabilities: The combination creates a differentiated, end-to-end payments platform from issuance to acceptance. Through an enhanced focus on innovation, the combined company will enable additional payment methods that give financial institutions, merchants and billers the ability to meet their customers’ needs across the multiple ways they want to pay.
     
  • Highly Complementary Products and Distribution Channels: The combined company will create additional value for Fiserv and First Data clients through an expanded universe of solutions. For example, Fiserv will be uniquely positioned to help financial institution clients more effectively meet the needs of business and commercial clients with offerings such as First Data’s Clover platform. First Data corporate clients will benefit through market-leading biller solutions from Fiserv.
     
  • Investing to Enrich Future Value Proposition: Fiserv and First Data will explore integrated, complementary technology capabilities and solutions to enhance client value and increase market differentiation. Following the close of the transaction, the combined company expects to invest an incremental $500 million over five years to create significantly enhanced solutions for clients and accelerate growth. The program will focus on a series of new and existing technologies, including next-generation merchant solutions, digital enablement, advanced risk management, and data-focused solutions to keep the combined company at the forefront of evolving client expectations and innovative payment methods.

The companies expect the deal to close in the second half of 2019.

“I have long admired what Fiserv has achieved over the years, and I look forward to working with the talented associates of both companies as we set a higher standard of innovation and service in the industry,” Bisignano said. “Our goal at First Data has always been to provide our clients with the most comprehensive suite of innovative, highly differentiated solutions and services, and I am excited by the significant value that the combination with Fiserv creates for all stakeholders.”

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