Top payments players are limping toward the end of the month posting losses on equity markets. PayPal , Marqeta, and Block are in the doldrums and even blue-chip incumbents like Visa and Mastercard haven’t been spared. Is it a matter of time before the carnage hits private markets? Not so, say private equity and credit fund managers. “I still see payments as being attractive,” says Grant Thornton partner John Cristiano. “You see a lot of interest there, lenders want to get into payments and e-commerce wants to get into payments.”
That merger interest could even be stoked should private sector valuations catch up to public ones, a private credit fund manager tells me. Private equity buyers now inclined to pass on eye-watering multiples may well come back to the table once price action rationalizes.
Not that lack of buyers is really the problem. The need to clear the field in ultra-competitive auctions has driven private equity to register gigantic deal values. For perspective, though, DA Davidson says the picture for fintech deal multiples is already rationalizing. In a note out earlier this month, the firm notes that trailing Ebitda multiples are clocking in at a historically reasonable 26.6x.
“Everyone likes to look at high-flyers as comps on the buyside,” Cristiano says. “They’re all pretty lofty still.”
That could continue to spell lucrative exit multiples for private equity and justify rich purchase multiples, if a bit less frothy.