Access Group, a hyper acquisitive software roll-up, has acquired Pay360 from Capita for £150m, net of cash, at an EBITDA multiple of 14.3. The purchase will give Access scale in direct debits and brings complementary expertise in card payments.
As a stand-alone, specialist business, Pay360 doesn’t fit with the new, slimmed down Capita which says the transaction will “reduce indebtedness and provide additional liquidity.” Completion is expected in late Q4 2022.
Pay360 is a payment gateway and payment facilitator with a strong position in the UK public sector. It processed £8.6bn in 2021 at an ATV of £60.50. The business also claims to “manage and support” a further £40b of “other” payments which are likely to be mainly low margin direct debits. Pay360 is a very healthy business. EBITDA was £10.5m in 2021 and profit before tax was £7m. Trading this year has continued positively. EBITDA margin in H1 2022 was 21%.
Access Group hired industry veteran Andrea Dunlop in 2020 to build Access Paysuite, its payment division, mainly through acquisition. The Pay360 deal is transformative as it is by far the largest purchase so far. Pay360 will bring an experienced management team, deep expertise in card processing, to complement existing strengths in direct debits, and a set of blue chip customers. This scale will be helpful as the market moves to Variable Recurring Payments.
Paysuite will no doubt be looking to cross-sell Pay360’s capabilities to Access Group’s 60,000 business customers although it will need to work hard to retain Pay360’s existing base. These customers may see the change of control as a trigger to reassess their vendor contracts. This could be a particular issue with accounts which have a strong existing relationship with Capita itself. A further challenge will be to rationalise systems from the four companies now comprising Paysuite so that customers are offered a simple set of propositions that easily integrate with their ERP and other enterprise software products.