FIS and Worldpay had agreed to an all-stock merger of equals which was meant to create a $43 billion payment processing behemoth. The deal included combining two leading companies with a shared vision for the future of payments. But one fatal flaw in the merger agreement resulted in what has been termed “the original sin” – a clause that would give Worldpay’s shareholders over 70% control of the combined company. This eventually led to the collapse of the deal, leaving both companies’ shareholders wondering what went wrong. In this article, we will discuss how ‘the original sin’ of Worldpay and FIS shattered their multi-billion dollar merger, and why both sides ultimately ended up walking away empty handed.
What is the original sin of Worldpay and FIS?
In December 2017, Worldpay and FIS announced a $35 billion merger that would have created a global payments powerhouse. The deal was hailed as a transformational moment for the payments industry, with the two companies complementing each other’s strengths and providing a one-stop shop for all things payments.
However, just months after the announcement, the deal fell apart amid accusations of an “original sin” that shattered the merger.
The original sin in question was Worldpay’s decision to spin off its UK business as a separate company just weeks before announcing the merger. This move effectively transferrred billions of dollars of debt from Worldpay to FIS, making the deal much less attractive to FIS shareholders.
As a result of this misstep, the merger was called off and both Worldpay and FIS were left to rebuild their businesses on their own. The original sin of Worldpay and FIS ultimately cost both companies dearly, and it remains a cautionary tale for other companies considering similar deals.
How did this shatter the merger between the two companies?
In January of 2018, Worldpay and FIS announced a merger that would have created a payments giant worth an estimated $35 billion. The all-stock deal was seen as a way for the two companies to compete with the likes of PayPal and Square.
However, just months after the announcement, the deal was called off amid concerns from shareholders. One of the primary issues was Worldpay’s “original sin” – its European merchant services business.
This business had been acquired by Worldpay in 2010 for $1.6 billion. At the time, it was seen as a growth opportunity for the company. However, it quickly ran into regulatory trouble in Europe. In 2016, Worldpay was fined £8 million by the UK’s Financial Conduct Authority (FCA) for “serious failings” in how it treated customers.
These fines put a strain on Worldpay’s relationship with its acquirer, JPMorgan Chase. JPMorgan had initially financed the acquisition with a $3 billion loan. However, it grew concerned about Worldpay’s mounting debt and decided to sell its stake in the company just two years later.
Worldpay’s original sin ultimately led to its undoing. The FCA investigation put pressure on the company’s stock price and made it difficult to find new investors. This made it harder for Worldpay to finance its growth and left it vulnerable to a takeover attempt by FIS.
What are the implications of this for future mergers?
In light of the recent failed merger between Worldpay and FIS, it is important to consider the implications that this has for future mergers. This failed merger is likely to have a ripple effect on future M&A activity, as it has cast doubt on the feasibility of large-scale payments industry consolidation.
There are a few key reasons why this particular merger fell through. Firstly, the two companies had very different cultures and approaches to business. Secondly, the size and scale of the combined company would have been unprecedented in the payments industry, raising concerns about its ability to compete effectively with existing players. Finally, there were regulatory hurdles that proved to be insurmountable.
All of these factors will need to be carefully considered in any future payments industry consolidation attempt. In particular, cultural differences will need to be addressed early on in any such process. Additionally, it will be essential to gain regulatory approval before proceeding with any large-scale consolidation.
Conclusion
The ‘original sin’ of Worldpay and FIS has been a tumultuous issue for both companies, having an immense impact on their proposed $43 billion merger. This case serves as a reminder to all executives of the importance of conducting thorough research into any potential business partners before entering into any long-term partnership or acquisition. By understanding the full implications and risks associated with any major venture, stakeholders can be better prepared to make sound decisions that will ultimately determine the future success or failure of their businesses.
