How activist Elliott can help Global Payments lift its share price

Company: Global Payments Inc (GPN)

Business: Global Payments is a payments technology company delivering software and services to its customers globally. Through its Merchant Solutions segment, it provides payments technology and software solutions globally to small-and-medium sized businesses and select mid-market and enterprise customers. It offers authorization, settlement and funding services, customer support, chargeback resolution, reconciliation and dispute management services, terminal rental, sales and deployment, payment security services, consolidated billing and reporting. It offers an array of business management software solutions that streamline business operations to customers in numerous vertical markets. Through its Issuer Solutions segment, it provides financial institutions and retailers technologies to manage their card portfolios. It provides flexible commercial payments, accounts payable and electronic payment alternative solutions that support B2B payment processes for businesses and governments.

Stock Market Value: $19.98B ($81.93 per share)

Activist: Elliott Investment Management

Ownership: n/a

Average Cost: n/a

Activist Commentary: Elliott is a very successful and astute activist investor. The firm’s team includes analysts from leading tech private equity firms, engineers, operating partners – former technology CEOs and COOs. When evaluating an investment, the firm also hires specialty and general management consultants, expert cost analysts and industry specialists. Elliott often watches companies for many years before investing and has an extensive stable of impressive board candidates. The firm has historically focused on strategic activism in the technology sector and has been very successful with that strategy. However, over the past several years its activism group has grown, and Elliott has been doing a lot more governance-oriented activism and creating value from a board level at a much larger breadth of companies.

What’s happening

Elliott has taken a position in Global Payments.

Behind the scenes

Global Payments is a leading provider of payment processing and software solutions, focused on serving small and medium-sized merchants and select mid-market and enterprise customers. The company operates through two segments: Merchant Solutions and Issuer Solutions. Merchant Solutions, contributing about three-fourths of total sales, provides payment solutions to enable customers to accept card, check, and digital payments, offering authorization, settlement, funding and other services. Simply put, Global Payments, as a merchant acquirer, acts as a middleman between the merchant and card network to authorize and facilitate transactions. Through its Issuer Solutions segment, Global Payments provides comprehensive commerce solutions supporting the payment ecosystem for issuers through offerings like core processing, enterprise tokenization and more. This segment was formed in 2019 following the combination of Global Payments and Total System Services (“TSYS”) in an all-stock merger of equals to create a leading payments company with a presence in both merchant acquiring and issuer services.

Peaking in 2021 at roughly $220 per share and an enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA) multiple of about 25-times, the company today trades around $80 per share and at a high single-digit multiple. The company managed to tread water during the pandemic despite the global slowdown in transactions and its focus on small and medium enterprises. However, sales growth has slowed significantly since 2020, now below the core acquiring market’s high-single growth rate, implying market share loss to disruptors like Stripe, Fiserv’s Clover, Shopify and others. That is all very interesting, but not what this activist campaign is about. This is about a company that made a poorly received “bet the farm” acquisition and is now at an inflection point that will determine its future.

On April 17, Global Payments announced that it had agreed to acquire Worldpay from Fidelity National Information Services (FIS) and private equity firm GTCR. The three-way cash-and-share acquisition also involved Global Payments divesting its Issuer Solutions (previously known as TSYS) business to FIS in a deal which valued Worldpay at $24.25 billion and Issuer Solutions at $13.5 billion. Global Payments’ shares fell 17% following the announcement for many good reasons: (i) this acquisition was announced after management’s commitments at their 2024 Investor Day to pursue increased shareholder returns, divestments, and, at most, small bolt-on acquisitions, (ii) management has a…