A Philadelphia-based company is buying an independent sales organization, a processor and a payroll-services company to pursue the goal of providing complete payments services to small merchants.
Universal Business Payment Solutions Acquisition Corp. is purchasing Electronic Merchant Systems, a Cleveland-based ISO; JetPay LLC, a credit and debit card processor; and two related companies, AD Computer Corp. and its subsidiary Payroll Tax Filing Services Inc., the company announced July 9.
The deals are pending regulatory and board approvals. The companies expect to close the transactions early in the fourth quarter.
Universal, which was formed to acquire companies in the payments industry, is paying $179 million in cash and stock for the three companies, Bipin Shah, the company’s chairman and CEO, said in a press release. It will pay $104 million in cash, $38 million in newly issued Universal common stock, and the balance as future payments in cash and stock. Some $25 million of such future payments is contingent on achieving certain targets.
“When we formed [Universal], the aim was to follow through on a simple concept –small-business owners should be able to receive all of their business processing [services] in one place,” Shah said.
Other companies do not offer that “all-encompassing” business-processing model, he maintained.
Combining payments and payroll is unusual but makes sense, agrees Mary Winingham, a consultant with Omaha, Neb.-based Planet Group Inc.
Both types of services have the same audience among small businesses, and offering payroll services could open the door for payments services at companies that have not accepted cards in the past, Winingham says.
However, a possible challenge could arise when sales staffs take on an unfamiliar product. Someone who has sold merchant services for five years, for example, may resist learning the payroll business, Winingham says.
Still, Universal has worked to create a structure that enables the three companies to work together smoothly, Shah said.
Founded in 1987, Electronic Merchant Systems provides merchant-processing services and electronic transactions to more than 16,000 customers in more than 100 cities across the country.
JetPay, a front- and back-end credit and debit card and check processor located in Carrollton, Texas, offers credit and debit card processing, online payment capabilities and merchant-account services. The company has two decades of experience, the release said.
Since 1971, Allentown, Pa.-based AD Computer and its Payroll Tax Filing subsidiary have provided payroll services and payroll tax-filing services to businesses of all types and sizes throughout the United States.
The combined company will serve small-business owners that use five payment transaction services, according to the release. They are payroll processing and related employee services, debit and credit card processing that includes accounts receivable processing and billing, accounts payable and procurement, funding related to debit and credit card processing receipt, and stored-value card products for employees.
“The market for payroll processing, card processing and funding is still relatively fragmented, with the majority of small businesses utilizing separate resources for each,” Shah said in the release. “We feel that by combining these three companies, we can address this market by providing a complete turnkey business-processing [service] for customers and do it efficiently.”
Shah will serve as chairman and CEO of the combined company, which will retain Electronic Merchant Systems President Dan Neistadt, JetPay President Trent Voigt and AD Computer President Nick Antich.
Shah is a long-time player in payments. In 1997, for example, he formed Shahdill Inc. to operate electronic delivery and distribution channels for banks. He also served as president and CEO of GenPass Inc., a Fort Washington, Pa.-based payments processor that U.S. Bancorp acquired in 2005.