Decrease in cross-border payment mergers and acquisitions by 35% this year reported
A new report by the FXC platform reveals a significant decline in mergers and acquisitions (M&A) in the cross-border payments space from Q1-Q3 2023, with a drop of around 35% compared to the same period last year.
Joe Baker, senior copywriter and author of the FXC report, attributes this decline to a combination of broad economic and regulatory factors impacting overall M&A activity globally, rather than factors specific to cross-border payments.
Economic Uncertainty and Weakening Global Economy
Heightened political fragmentation, trade tensions, inflationary pressures, and labor market shortages have dampened dealmaking enthusiasm, causing investors to exercise caution and adopt a patient approach to identifying resilient opportunities.
Geopolitical Issues
Continued geopolitical tensions have contributed to dealmaking hesitance, especially in cross-border contexts where regulatory scrutiny is higher.
Regulatory Scrutiny and Changing Antitrust Guidelines
In the U.S., the introduction of new 2023 Merger Guidelines by the Federal Trade Commission (FTC) and Department of Justice (DOJ) has led to stricter reviews and enforcement related to mergers, increasing regulatory uncertainty and risk for potential deals. This tighter scrutiny can reduce deal flow, particularly cross-border transactions which naturally face more complex regulatory compliance.
Shift in Investment Strategies
Investment managers have shown a decline in activity and sought more resilient or domestic deals rather than cross-border expansions.
Decline in M&A Volumes
These systemic factors have led to a wider decline in merger volumes (reported as ~25% in the first half of 2023 globally), with the cross-border payments sector reflecting a comparable downtrend (~35% decline in notable deals). This aligns with overall market trends rather than a sector-specific crisis.
The FXC report focused on M&A activity in the cross-border payments space from Q1-Q3 and found that the decline was observed across most types of businesses, with the exceptions of card issuers. Among the affected sectors, B2B payments, consumer money transfers, and payment processors saw substantially fewer significant M&A this year.
To qualify for assessment, one or both companies must have a substantial business focus in cross-border payments, and acquisitions need to be a significant stake of the acquiree's business to be considered. The FXC report assessed a wide scope of companies in the cross-border payments space.
The biggest disclosed M&A this year was Worldpay's acquisition by GTCR at $18.5bn. However, there appear to have been fewer disclosed acquisitions relevant to cross-border payments to achieve multi-billion dollar status this year compared to last year.
The majority of the activity is occurring in the US, with around 33 out of 90 acquiring companies having a headquarters in the country, and 27 acquirees based there. Our platform analyzed data from various third parties and news outlets to determine the status of M&A in the cross-border payments space.
In conclusion, the decline in cross-border payments M&A can be largely attributed to a combination of broad economic and regulatory factors impacting overall M&A activity globally, rather than factors specific only to cross-border payments.
The economic uncertainty and weakening global economy, heightened by political fragmentation, trade tensions, inflationary pressures, and labor market shortages, have resulted in a cautious approach to investing, leading to a decline in merger and acquisition (M&A) activity, including in the cross-border payments sector.
Investment managers, adopting a patient approach to identifying resilient opportunities, have shown a decline in activity and are favoring more resilient or domestic deals over cross-border expansions, contributing to the observed decline in M&A volumes in the cross-border payments space.
