Nuvei goes private: Inside the Advent International deal

Nuvei goes private: Inside the Advent International deal

Last week, Nuvei announced that a significant stake of its company was being acquired by Advent International in a deal that will take the company private. We explore the key details of the acquisition and what it means for Nuvei going forward.

On 1 April, Canadian payments provider Nuvei announced that it was being taken private by Advent International, one of the world’s biggest private equity investors, in a deal worth approximately $6.3bn. The acquisition of Nuvei, which was backed by Hollywood actor Ryan Reynolds last year, is one of the bigger take-private deals seen in the global payments industry recent years.

It has been three and a half years since Nuvei listed on Canada’s stock market for $833m, setting the record at the time for being the county’s biggest ever tech IPO. Just over a year later in October 2021, the company dual-listed with an IPO in the US, in which it raised an additional $424m. Going public helped the company strengthen its financial position, pay off debts and invest in further M&A, including its $1.3bn acquisition of US-based B2B provider Paya last year. 

However, the company is now going private again in the industry’s latest high-profile private equity acquisition. It follows FIS’s sale of Worldpay to GTCR and MoneyGram’s acquisition by Madison Dearborn Partners in 2023. 

To explore how the company has come to this point, in this report we take an in-depth look at Nuvei, including its current financial position versus market competitors and how the acquisition feeds into its ongoing strategy. 

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Nuvei goes private: Background of the deal with Advent

Terms of Nuvei’s deal with Advent International

Under the all-cash deal that values the company at $6.3bn, a significant stake in Nuvei is being acquired by Advent International, a private equity firm that has invested in a number of other fintechs. As a result, it will become a private company, with Chair and CEO Philip Fayer and private equity firms Novacap and CDPQ indirectly holding 24%, 18% and 12% stakes, respectively. 

Key details of the Nuvei-Advent International deal
Nuvei key events timeline and overview of key metrics

Shareholders will receive $34 per share in cash on conclusion of the deal. This represents a 56% premium over Nuvei’s closing share price of $21.76 on the Nasdaq on 15 March 2024. 

The company will continue to be based in Montreal, Canada with Fayer at the helm. He said that the acquisition marked a “new chapter for Nuvei” that would help it continue to deliver for customers, accelerate revenues, drive innovation across technology and invest in opportunities. 

On Advent’s end, Managing Director Bo Huang said that it was looking forward to helping Nuvei continue to “scale from its base in Canada as a global player in the space”. Subject to approvals, the acquisition is expected to close in late 2024 or the first quarter of 2025. 

History of Nuvei

Nuvei was originally founded in 2003 with the name Pivotal Payments, after Fayer had struggled to open a merchant account and enable card acceptance at another (separate) business. Originally, Pivotal focused on processing payments for small and medium-sized businesses in the US, before entering Canada with the acquisition of Cardex Payments. 

In 2006, Pivotal received an investment from Goldman Sachs to help it drive an acquisition strategy over the following few years, which included payment processors Cardex and Tangerine. These acquisitions helped the company to expand into Canada and boost its capabilities in areas such as point-of-sale and online ecommerce. In 2008, Nuvei became the largest non-bank merchant acquirer in Canada and in 2013, it launched its Global Acquiring Platform for card acceptance. 

In 2017, the company received an additional joint investment from Canadian-government owned Caisse de dépôt et placement du Québec, as well as private equity firm Novacap. At the time, these companies valued Pivotal at C$525m ($424m). 

The following year saw a number of acquisitions that expanded the company’s services across large-volume merchants and debt repayment, as well as B2B and business-to-government payments. It also saw Pivotal change its brand name to Nuvei. The company completed an $889m acquisition of Safecharge in 2019.

Mergers and acquisitions, however, led to the company seeing higher debts and a need to inject capital to drive further expansion. In 2020, the company closed its $833m IPO, which was followed by more acquisitions, including Simplex, which introduced crypto payments acceptance to Nuvei, as well as Paymentez, which allowed the company to expand its capabilities and presence in Latin America. 

In 2023, Nuvei gained major exposure after Hollywood actor and entrepreneur Ryan Reynolds announced he was investing an undisclosed amount in the company. Also that year, Nuvei acquired Paya for $1.3bn to expand its focus on B2B payments as well as government payments and integrated software vendors (ISVs), which make and sell software and apps (Salesforce is an example of an ISV). Nuvei is increasingly targeting ISVs, for example, to add payment processing services into their software.

Nuvei’s payments products and services

Today, Nuvei provides a range of payment solutions to businesses – in particular, payment acceptance and payouts. The company serves both small and medium-sized businesses, as well as larger corporations such as Virgin Atlantic, Shein, Steam and Microsoft. It has also formed partnerships with a number of major payments players, including Visa, Mastercard and Alipay. 

Aside from payment acceptance and payouts, Nuvei also offers card issuing, banking and risk and fraud management services. It covers a wide range of industries, including digital goods (i.e. ebooks), online gaming, financial services and travel. Nuvei also provides acquiring and consultancy services to other companies operating in the payment space. 

The company serves payments in store with point-of-sale (PoS) and self-service checkout solutions, as well as online ecommerce with solutions such as hosted payment pages, virtual terminals and APIs that businesses can host on their own pages. Its services are similar to those offered by Adyen, Stripe, and Worldpay. 

From a cross-border perspective, Nuvei enables global payments for businesses, allowing them to accept payments from customers in local currencies. It also provides services that enable bulk payouts for businesses to multiple suppliers, vendors and sub-merchants. 

Over the last 20 years, Nuvei has expanded its coverage across more than 200 markets, with more than 150 currencies (including cryptocurrencies) available and enables acceptance across 680 payment methods, spanning credit and debit cards, prepaid cards, bank transfers, mobile payments, vouchers and ewallets. The company also provides local acquiring services in 50 markets. It claims to serve more than 50,000 businesses worldwide. 

In addition, Nuvei enables online bank transfers and helps businesses connect to a network of plugins and platforms such as Adobe Commerce, Opencart and Salesforce. It has more than 2,000 employees.

Focus on growing B2B services

Nuvei's recent acquisitions target expansion
Key details around acquisitions announced by Nuvei, 2019-2023

Nuvei has been part of a shift towards B2B that has increasingly been seen amongst leading cross-border payments providers. Its recent acquisition of Paya – another processor that also serves ecommerce, software providers and B2B customers – was largely driven by Paya’s footprint in B2B goods and services, as well as healthcare, non-profit and education and government and utilities markets. In particular, Nuvei said last year when it acquired Paya that it was integrated with more than 300 ISV platforms (i.e. software solutions that are offered by ISVs and sold to companies in niche or mass markets).   

This has been bolstered by Nuvei’s most recent $30.5m acquisition of Till Payments – a much smaller company, but one that Fayer said in Nuvei’s most recent earnings call would help the company accelerate its B2B and ISV strategy. 

“It is growth accretive in our B2B, Government & ISV channel, and certainly drives a footprint for us to accelerate ISV engagements around the world,” he added.

B2B cross-border payments acquisitions announced in 2023
Examples of B2B payments acquisitions with cross-border relevance

Nuvei’s acquisition of Till and Paya were reflective of a comparatively high number of acquisitions in the B2B cross-border payments space last year, with others including money transfer provider OFX’s acquisition of Paytron to expand its services for B2B clients.

Last year, FXC Intelligence projected that the B2B cross-border payments would be worth $56.1tn by 2030 out of an overall cross-border payments market worth $290.2tn. This highlights the scale of the opportunity in a market that is still highly fragmented compared to the consumer cross-border payments market. 

Through its recent acquisitions, Nuvei has been building out its infrastructure to try and take advantage of this opportunity. This manifested in October 2023, when the company announced it had launched its enhanced payments solution for B2B in Canada. 

Access FXC’s market sizing data to identify opportunities globally

Advent International: History of payment investments

Advent International is a US-based private equity firm that, since its founding in 1984, has invested over $78bn in 420 private equity investments across 42 countries. The company’s investment focus is spread across business and financial services, healthcare, industrial services, retail and consumer leisure, and technology. 

Advent invests in companies for a variety of different reasons, from buyouts to private investment in public equity to recapitalisation. After adding Nuvei to more than 400 companies that Advent has publicly invested in since 1990 (according to its website), the largest category of investments (around 40%) are listed as buyouts, which shows it takes a strong focus on acquiring a controlling stake in companies.

Advent International's growing investment in payments
Advent International's total number of investments, 1990s-2020s

Payments-focused companies only make up around 11% of the total public investments Advent International has made since 1990 (this includes total number of investments, including repeated investments in the same company, such as its 2014 and 2018 backing of Danish payments provider Nets). However, the company has invested in more payments-focused companies in recent years, with 25% of its total investments since the start of the decade being in payments-related companies, compared to 13% across its investments in the 2010s.

Advent ramps up investment in payments
Advent International's payments-related investments, 2021-2024

Notable payments investments it has made include a buyout of UK-based ewallet MangoPay in 2022, an expansion capital deal for Brazil-based payments processor Ebanx in June 2021 and an investment in UK-based global integrated payments provider Planet in May 2021. 

Where is Advent backing payments companies worldwide?
Headquarter locations for Advent-backed payment companies

Mapping Advent’s investments in payments companies worldwide, we see that the majority of them are in the US (22%), followed by Brazil (16%), the UK (13%) and India (9%), but Nuvei would be its first payments-focused company to be based in Canada, However, it has made a few other investments there in other industries.

Though the US remains the leading fintech hub in the West, Canada has been home to a number of fintechs in recent years, including global prepaid card provider Koho Financial and gig worker payments company and Wise partner Payfare. The country is also home to leading ecommerce and checkout services provider Shopify. 

Nuvei key financials

FY 2023 revenues and 2024 guidance

Nuvei historic revenues and EBITDA margin
Nuvei revenues and EBITDA margin 2020-2023 and YoY growth

Nuvei has seen revenues grow since its initial IPO in 2020, but year-over-year annual growth figures have varied.  

The company saw revenues grow by 93% in 2021. This was driven by Nuvei growing its wallet share with existing customers, as well as solid growth in Europe, the Middle East and Africa (EMEA). It also launched its global payments unit in North America and moved into LatAm through its acquisition of Paymentez.

In 2022, while it still grew, the company saw some headwinds from changing foreign exchange rates and from the declining value of cryptocurrencies that year following the collapse of the TerraUSD stablecoin. In 2023, the company’s Paya acquisition contributed significantly to an overall 41% revenue rise to $1.2bn (the revenue from the Paya acquisition over the course of the year was $263m). By comparison, the company’s organic revenue – which removes the impact of FX and acquisition-related revenues – grew 9% to $922m. 

Nuvei’s adjusted EBITDA rose by 40% to $120.1m in FY 2023, though its margin declined slightly from 38.9% to 37.3%. Looking forward, the company said it expected its revenues to rise 13-16% to between $1.34bn and $1.38bn in 2024 and expected its EBITDA to rise to between $480m and $510m, which would give it an EBITDA margin of 36.8-38%. It also gave guidance for capital expenditures, which the company wants to keep at 4-6% of revenue over the medium term (it had been 3.7%, 5.7% and 4.6% in 2021, 2022 and 2023 respectively).

In its Q4 and FY 2023 earnings report, published at the start of March, Nuvei said that its scaled global platform has reached an inflection point where it can continue to expand its EBITDA margin. In May 2023, Fayer said that he believed Nuvei has the potential to eventually have $1bn of EBITDA, though he clarified that this was just his own opinion and did not constitute a formal outlook. 

Focus on growing B2B revenues

Nuvei’s revenue is still dominated by global commerce, which spans mid-market to large enterprise customers across multiple verticals covering both domestic and cross-border payments. However, the company is striving to make bigger moves into providing solutions for B2B verticals.

Nuvei's revenue is dominated by global commerce
Nuvei revenue split by channel, 2022-2023

Looking at how revenues are split across the company’s product channels in its 2023 results, B2B, government and ISV payments accounted for 16% of its total revenues in 2023. However it should be noted that the company reorganised its reporting structure after its Paya acquisition to show the split between three sectors: global commerce; B2B, government and ISVs; and SMBs. It has therefore noted that the growth in this segment is not meaningful compared to 2022, however it did highlight 15% growth in the year for global commerce and 31% growth in its SMB business.

Nuvei historic revenue and EBITDA margin
Nuvei quarterly revenues and adjusted EBITDA margin 2020-2023

It should also be noted that Nuvei provided pro forma results to quantify the actual growth of Nuvei with the addition of Paya to give context on how the combined businesses have grown. In particular, this meant adding Paya’s reported revenues for Q4 2022 to Nuvei’s Q4 2022 results, net of interchange fees, to align with Nuvei’s revenue calculations and therefore provide a consistent comparison with Q4 2023. Here the company said that in Q4 its global commerce revenues rose 12% YoY on a pro forma basis, to $181m, and represented 56% of total revenue.

Meanwhile, B2B, government and ISV revenue increased by 19% YoY on a pro forma basis to $59m and represented 18% of total revenue in Q4. Nuvei also said that it was striving to grow its B2B, government and ISV channel to 20% plus over the medium term. Finally, it said that SMB revenue had risen by 2% YoY pro forma to $82m, which represented 26% of total revenue in Q4.

Nuvei's processing services grew in 2023
Nuvei revenue split by channel, 2022-2023

Also in 2023, Nuvei disaggregated its revenues between merchant transaction and processing services, which are derived primarily from ecommerce and retail point-of-sale processing; other revenue, which includes hardware such as point-of-sale systems; and interest revenue, which may be earned on behalf of customers. This is how Nuvei had been splitting its revenue streams prior to the Paya acquisition. In 2023, merchant transaction and processing services was $1.18bn, while other revenue accounted for $8.9m and interest revenue accounted for $3.1m. 

Speaking in an interview featured on Nuvei’s website in May 2023, Fayer spoke about how global commerce is being driven by wallet share expansion and Nuvei’s go-to-market efforts, as well as the expansion of its sales team. He also attributed the company’s success to having local account management in markets in the correct language, as well as doing due diligence on M&A. However, the company is now looking to accelerate its go-to-market on B2B payments. 

In particular, Fayer noted that Paya was only supporting credit card payments and enterprise resource planning systems in the US. However, many large enterprises have a global footprint, with payments between global businesses being directly complementary to Nuvei’s technology. With this in mind, the company wants to drive between $50m and $100m in payment synergies with Paya by 2027. This involves investing in product innovation to help Paya be the leader in its space.

Nuvei is expanding to new geographies

Nuvei's revenue is concentrated in EMEA and North America
Nuvei revenue split by geography, 2020-2023

When it comes to geographies, Nuvei’s revenues have historically been concentrated in EMEA and North America. In 2023, North American revenues accounted for 54% of revenues, compared to 41% for EMEA, 4% for LatAm and 1% for the APAC region. North America also saw the highest growth at 91%, followed by LatAm (55%), though growth has been slower in EMEA (5%) and APAC (5%). 

The company mentioned the potential to grow in the LatAm market, where legislation is pending to enable gaming, citing Brazil as a specific growth opportunity. APAC remains small, but the company has expanded into the region, launching local acquiring services in Singapore, Hong Kong and Australia. It also launched a new office in China in October 2023, and just this week secured a major payment institution license from the Monetary Authority of Singapore.

Last year, through a partnership with Mastercard Send, Nuvei enabled businesses in Singapore to process rapid cross-border payouts to more than 1.5 billion Mastercard debit, credit and prepaid cards worldwide.

Benchmarking Nuvei against other players

Nuvei’s revenue and EBITDA versus other payment processors

Annual revenue vs competitors
Nuvei 2023 revenue compared to select competitors

When comparing total revenues to those of the major payment processors we track in our state of payments processors report, Nuvei is currently on the lower end of the spectrum. Total revenues of $1.2bn in 2023 place it roughly between Paysafe (which achieved revenues of $1.6bn in 2023) and dLocal ($650m). 

It’s worth noting that the leading players on this list – PayPal, Fiserv and Global Payments – have been around for considerably longer and have a considerably larger shares of ecommerce markets, particularly in the US.

Revenue growth vs payment processor competitors
Quarterly YoY revenue growth for Nuvei and select competitors, 2020-23

In terms of quarterly revenue growth, Nuvei witnessed the benefits of a surge of digital payments during the pandemic, similar to other processors. Nuvei’s attachment to digital currencies, as well as FX impacts, led to growth slowing in 2022 (particularly Q4 2022, when its revenue growth was 4% while organic growth excluding digital assets at constant currency was 26%). 

However, the company has seen higher quarterly growth this year than some other payment processors, with revenue drivers including rapid growth of its sales force and its acquisition of Paya.

EBITDA margin vs competitors
Nuvei 2023 EBITDA margin compared to select competitors

Looking at profitability shows that Nuvei performed comparatively well in terms of EBITDA margin for its 2023 results. This shows that the company has been continuing to drive profits that are in line with the industry, despite growing costs from building out its workforce.

Volume and take rate versus other processors

Annual volume vs competitors
Nuvei 2023 volume compared to select competitors

Nuvei’s total volume rose by 59% in 2023 to $203bn, while organic total volume growth at constant currency was 23% (to $156.5bn). Looking at volumes, Nuvei currently sits higher in terms of volumes than Paysafe and dLocal, but behind Block. However, it is again well behind other key players in the industry such as Worldpay, PayPal, Adyen and Stripe. 

Take rate vs competitors
Nuvei 2023 take rate compared to select competitors

When it comes to take rates, Nuvei’s 0.59% is also lower than other large players in the payment processor space, though Block’s lead in this space may stem from offering a broader range of services beyond payment processing. 

Nuvei has said in the past (in particular, in its Q3 2022 earnings call), that the company’s focus is on providing customers with solutions they need to accelerate growth irrespective of yield, but the company is focused on driving incremental gross profit by expanding its set of solutions and wallet share. 

How is Nuvei valued against competitors?

Equity valuation compared to other payment processors
Nuvei valuation compared to select competitors

Nuvei’s valuation at $6.3bn (based on its sale price) is in alignment with its revenue and volume results – above dLocal and Paysafe, but behind other market-leading players. 

What opportunities does the deal offer Nuvei?

In the press release accompanying the announcement of Advent’s purchase, Fayer said that the company’s initiatives have always supported driving customers’ revenue, innovation and developing its people, and that “bringing in a partner with such extensive experience in the payments sector will continue to support our development”. So what could this mean for Nuvei in practice? 

The company’s reasoning for going public was to generate additional funds that would help it to deleverage its debts and return to its M&A strategy, which has been and remains important to the company growing on its current scale, as well as rewarding its employees with stock options. 

However, looking specifically at the company’s organic growth and pro forma figures for 2023 (which serve to highlight the combined growth of both Nuvei and Paya together) shows that the company is coming under pressure to deliver the same levels of revenue growth to achieve the outcomes public shareholders might expect. 

How Nuvei's share price has changed over the years
Share price of Nuvei over time

Similar to other publicly owned processors such as Adyen and dLocal, Nuvei’s share price grew significantly during the pandemic but in the time since has declined significantly. Nuvei’s price per share was $123.1 on the NASDAQ when its US IPO closed in October 2021, much higher than the $34 per share that stakeholders will receive as a result of the Advent sale.

There have been several factors feeding into this. The tech sector as a whole saw stocks fall in price by more than 30% in 2022, driven by higher interest rates and the movement of investors to stocks they saw as more stable. 

Nuvei has also been subject to critical reports from Spruce Point Capital Management LLC in 2021 and 2023. The most recent report claimed, amongst other things, that Paya had been losing market share before its acquisition and also questioned its ties to collapsed crypto firm FTX. Nuvei has dismissed the claims made by both reports. Despite declines in 2022 and 2023, the company’s share price has been growing since late 2023 into this year, likely influenced by consistent sales growth. 

The upshot for Nuvei is that going private may be a way for it to continue developing its products and expanding into new regions without having to deal with public scrutiny and the time-consuming nature of earnings reports. Payment processors have seen notable impacts from having to share their earnings – for example, Adyen saw a major share price dip last year when it announced a hiring spree as other companies were announcing layoffs (though it has since recovered from this). 

Prospects for Nuvei

Nuvei is currently focusing on building out its B2B and ISV revenue streams, and has recently begun bolstering its position in APAC and other emerging markets such as LatAm. It currently only sees a small amount of its revenues from these markets, but there is still a big market opportunity. 

Bolstered by a major private investment, this could help the company to expand its global footprint and take advantage of total addressable markets where it isn’t making as much of an impact as other global payment processors.

In any case, the Nuvei deal is an example of a high-profile acquisition in a time when the payments industry has seen venture capitalists pull back on funding due to high interest rates, inflation and some major company collapses in the last few years. Investors and industry players will be monitoring Nuvei and other acquired players to see whether the move back towards being a private company pays off.

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