FIS loses a small fortune in $11.7 billion Worldpay sale: CEO admits false steps on investment
Worldpay -- "a dozen payment M&A deals in a trenchcoat" -- will find a new home in the warm embrace of private equity after investment failings.
FIS sells Worldpay. Takes huge haircut. CEO admits investment failings.
FIS has agreed to sell a majority stake in Worldpay for $11.7 billion as it opts to take a heavy loss on the failed acquisition – with CEO Stephanie Ferris admitting that “we didn't move our investments over correctly.”
FIS bought Worldpay (itself “just a dozen payment M&A deals in a trenchcoat” as one wag put it; read an excellent history of this bag of spanners here) in 2019 at a $43 billion valuation. The financial services technology provider took a $17.6 billion writedown in February 2023.
It will retain a 45% stake after the sale to Chicago-based GTCR.
FIS’s President Gary Norcross had said on a call at the time of the 2019 acquisition that “this is an offensive deal that looks to where the growth is. It’s a fast-moving market and you have to move to the growth.”
But Worldpay, which processed over $2 trillion in payments volume in 2022, did not move fast enough to capitalise on the rapidly evolving demands of merchants around and after the pandemic, critics say – and more nimble rivals like Square and Adyen have stolen its thunder.
FIS sells Worldpay
FIS CEO Ferris just last month admitted that the company had failed Wordpay, saying “You have to put product on it both organically and inorganically. We haven't been able to do that since we bought it in 2019.”
“We've only acquired one asset for it, which is going really well. But as you think about the pace of change in payments and what that business can really do is, if you buy an asset or you buy distribution, you put it on the platform, it accretes a lot of revenue and a lot of profit…”
Speaking at a Morgan Stanley investor conference in June, she added: “Worldpay never had a direct distribution channel to SMBs… we never believed owning software for Worldpay was the right answer, because fundamentally, we didn't have a direct distribution channel to sell it through, and there were people in that marketplace that made a lot more sense… we were going to be fighting a losing battle. What we did was we said, ‘look, we think payments is going to be embedded in software.’
"What we didn't do, until I came back and we bought Payrix, was move from integrated to embedded. You need a different mechanism, which we bought, but maybe bought a little bit too late. So, the verticalization of that software, where people bought the end ISVs [independent software vendors] we were competing against, became a challenge… we didn't move our investments over correctly,” the FIS CEO said at that event.
Separating the two companies should not be too complex, she suggested at a Morgan Stanley investor conference: “It's still primarily separate. So, we have a lot of overlapping corporate functions, but the development teams, the technology teams are still running fairly separate [sic].”
FIS has embarked on a significant overhaul under new CEO Ferris amid pressure from activist shareholders. This has included the hire of a range of new leadership figures including new CTO, Firdaus Bhathena; new President of Platforms, Google veteran Tarun Bhatnagar; and new president of Banking Solutions, Capital One veteran John Durrant.
The restructuring comes amid significant ongoing changes across the core banking segment where FIS has historically stood out, with many banks taking advantage of the cloud to build out or migrate modular core banking systems and a range more nimble startups taking market share.
