GTCR buying Sage U.S. unit to develop small-biz integrated payments

Merchant acquirers are racing to sell "integrated payments," or a one-stop shop for transaction processing and myriad other services that stores can tie to the point of sale. But small to medium sized businesses are not often the targets for these efforts.

This is where Chicago-based private equity firm GTCR sees an opportunity, entering a deal to acquire Sage Payment Solutions for $260 million.

"We live in a 'software economy,' but SMBs have been late relative to large enterprises in terms of getting software to run their businesses and have integrated payments," said Collin Roche, managing director at GTCR.

GTCR plans to acquire SPS form the Sage Group, a U.K.-based accounting, payroll and payment gateway company. The deal is expected to close in the third quarter.

The Reston, Va.-based SPS provides payment processing and merchant services to about 100,000 small to medium sized businesses in North America, with a menu of credit card, ACH, check, gift and loyalty card processing across channels.

GTCR plans to partner with SPS' management to fund future acquisitions in the processing industry and advance internal projects. GTCR has committed up to $350 million of equity capital to the SPS platform to build out its merchant services.

"The technology integration is more central to the payment now," Roche said. "And they have an expertise in B-to-B payments and are well positioned in that regard."

Sage has been building out different parts of its business over the past year, including a partnership with Vantiv and Abila to bolster its fraud prevention and relationship management.

The deal comes as most large processors are spending substantially to integrate payments with other services. In an earlier interview, Thad Peterson, a senior analyst at Aite Group, said the acquiring industry is under pressure to provide "value adds" to reach a broader set of merchant needs.

TSYS spent $2.4 billion to acquire TransFirst in an omnichannel play in 2016, while First Data at the end of May announced a $750 million deal to buy CardConnect to accelerate its own diversification into an omnichannel merchant services technology provider. Vantiv has also spent billions acquiring technology to power an integrated payments strategy.

"It makes sense for all of this technology to work together," Roche said. "Not just for merchants but other retail type transactions such as doctor's offices."