In a major shakeup for the fast-growing fintech sector, Nuvei Corporation (NASDAQ: NVEI, TSX: NVEI), a leading Montreal-based payment technology provider, has agreed to be taken private by Advent International and existing Canadian shareholders in an all-cash deal valued at approximately $6.3 billion USD.

As one of Canada’s most prominent fintech companies, Nuvei has made a name for itself by providing innovative payment solutions to merchants in over 200 markets worldwide. In 2023 alone, the company processed over $200 billion in transaction volume and generated $1.2 billion in revenue, cementing its position as a major player in the payment technology space.

The decision to take Nuvei private raises intriguing questions about the future direction of the company and the broader financial services and payment processing industry. Will going private allow Nuvei to take bolder risks and pursue more aggressive growth strategies outside of the public eye? Or will the reduced transparency and accountability that comes with being a private company lead to higher prices and less personalized service for merchants?

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Nuvei Background

Nuvei Corporation (NASDAQ: NVEI, TSX: NVEI) is a leading Canadian fintech company that has made a significant impact in the global payment processing industry. Founded and led by CEO Philip Fayer, Nuvei has built a reputation for providing innovative and flexible payment solutions to merchants operating in over 200 markets worldwide.

One of Nuvei’s key strengths is its extensive global reach and localization capabilities. The company offers local acquiring services in 50 markets, allowing merchants to process payments in their customers’ preferred currencies and payment methods. Nuvei supports an impressive 150 currencies and 680 alternative payment methods, making it easier for ecommerce businesses to expand into new markets and cater to diverse customer preferences.

Nuvei’s technology platform is designed to be modular, flexible, and scalable, enabling merchants to accept next-generation payments (like cryptocurrency), offer a wide range of payout options, and benefit from essential services such as card issuing, banking, risk management, and fraud prevention. This comprehensive suite of services allows Nuvei’s clients to streamline their payment operations and focus on growing their core business.

The company’s success is evident in its strong financial performance. In 2023, Nuvei processed over $200 billion in transaction volume and generated $1.2 billion in revenue, showcasing its ability to attract and retain a large and diverse customer base. Nuvei’s growth has been driven by a combination of organic expansion and strategic acquisitions, as the company continues to enhance its capabilities and expand its global footprint.

As a publicly-traded company on both the American Wall Street and Toronto Stock Exchange, Nuvei has attracted significant attention from investors and industry observers. The company’s strong track record of growth, innovative technology, and experienced leadership team have positioned it as a major payments processor in the highly competitive space. With its recent consideration of a potential buyout and privatization, Nuvei appears poised for even greater success and transformation in the years ahead.

Deal Details

The proposed buyout of Nuvei Corp is a significant transaction that involves a consortium of investors led by the private equity firm Advent International, a major private equity firm. The all-cash deal is valued at approximately $6.3 billion USD and has garnered support from Nuvei’s largest existing shareholders, including founder and CEO Philip Fayer, investment funds managed by Novacap, and Canadian pension fund CDPQ.

Under the terms of the agreement, Nuvei shareholders will receive $34 per share, representing a substantial 56% premium over the company’s unaffected closing share price on March 16, 2024. This premium reflects the strong value proposition and growth potential that Nuvei offers, as well as the confidence that Advent International and the supporting shareholders have in the company’s future prospects.

Following the completion of the transaction, Nuvei’s key shareholders will retain significant stakes in the newly private company. Philip Fayer, who will continue to serve as Chairman and CEO, will hold approximately 24% of the company. Investment funds managed by Novacap and CDPQ will own stakes of approximately 18% and 12%, respectively. This continued investment by Nuvei’s existing shareholders demonstrates their belief in the company’s long-term strategy and their commitment to supporting its growth and success.

The involvement of Advent International, a well-respected private equity firm with a strong track record of investing in and supporting technology companies, brings additional expertise and resources to help Nuvei achieve its goals. Advent’s experience in the fintech sector and its global network of portfolio companies and advisors could prove invaluable as Nuvei navigates the challenges and opportunities of the rapidly evolving payment processing industry.

The decision to take Nuvei private through this buyout deal is expected to provide the company with greater flexibility to execute its long-term strategy and make strategic investments without the short-term pressures and volatility often associated with being a publicly-traded entity. This could allow Nuvei to focus on expanding its product offerings, enhancing its technology platform, and pursuing further international growth opportunities.

As the transaction progresses, it will be subject to customary closing conditions, including regulatory approvals and the approval of Nuvei’s shareholders. If successful, the buyout will mark a new chapter in Nuvei’s history and could have significant implications for the broader payment processing industry as one of its major players transitions from a public to a private company.

Implications of Going Private

Nuvei Corporation’s decision to go private is a significant move that could have far-reaching implications for the company, its customers, and the broader payment processing industry.

One of the key benefits of going private is that it allows Nuvei to operate with less transparency and fewer disclosure requirements compared to being a publicly-traded company. This reduced scrutiny could give Nuvei’s management team more flexibility to make strategic decisions and pursue growth opportunities without the constant pressure of meeting quarterly earnings targets and satisfying public shareholders’ short-term expectations.

Moreover, as a private company, Nuvei may be able to take a longer-term view of its business and invest in initiatives that may not pay off immediately but could lead to significant growth and value creation over time. This could include investing in research and development, expanding into new markets, or acquiring complementary businesses that strengthen Nuvei’s competitive position.

Another potential implication of going private is that Nuvei may be more willing to take on additional risk in pursuit of growth. Without the need to worry about the impact of quarterly earnings on its stock price, Nuvei’s management team could feel more empowered to make bold moves and experiment with new products, services, or business models that have the potential to disrupt the payment processing industry.

However, there are also potential downsides to consider. As a private company, Nuvei will no longer be subject to the same level of market discipline and accountability that comes with being publicly traded. This could lead to a lack of transparency and reduced oversight, which may be concerning for some of Nuvei’s customers and partners.

Additionally, the reduced visibility and liquidity of Nuvei’s shares could make it more difficult for the company to attract and retain top talent, as employees may prefer the potential upside and prestige associated with working for a publicly-traded company.

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Potential Downsides of Consolidation

As Nuvei Corporation prepares to go private, it is important to consider the potential downsides of consolidation within the payment processing industry.

One significant concern is that the creation of bigger payment conglomerates often leads to less competition and higher prices for merchants. As larger companies acquire smaller competitors and gain greater market share, they may have less incentive to offer competitive pricing or to innovate in terms of product offerings. This can result in merchants paying higher fees for payment processing services, which can ultimately impact their bottom line and ability to remain competitive in their respective markets.

Another potential issue is that the personal touch and customization that many merchants value can get lost as payment providers scale up. Smaller payment processing companies often differentiate themselves by providing exceptional customer service and tailoring their solutions to the unique needs of individual businesses. However, as these companies are acquired by larger entities, there is a risk that this level of personalization and attention to detail may diminish. Merchants may find themselves dealing with more generic, one-size-fits-all solutions that do not fully address their specific requirements.

In the case of Nuvei, the company has grown rapidly through a series of acquisitions in recent years. While this strategy has allowed Nuvei to expand its capabilities and global reach, it also presents the challenge of smoothly integrating these acquired businesses into a cohesive whole. Integrating disparate systems, technologies, and corporate cultures can be a complex and time-consuming process, and there is always the risk that the expected synergies and benefits of these acquisitions may not materialize as planned. If Nuvei fails to effectively integrate its acquired businesses, it could lead to operational inefficiencies, reduced innovation, and a lack of cohesion in its product offerings.

As Nuvei transitions from a publicly-traded company to a private entity, it will be important for the company’s leadership to be mindful of these potential downsides of consolidation. By prioritizing competition, maintaining a customer-centric approach, and ensuring the smooth integration of its acquired businesses, Nuvei can mitigate these risks and continue to deliver value to its merchants in the rapidly evolving payment processing landscape.

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