Deal of the Month – TSYS International
‘both existing clients and new prospects believe that TSYS is the best, most complete, end-to-end provider of card solutions in the UK market’
With the completion of TSYS acquiring the remaining 45-percent ownership stake in TSYS Managed Services EMEA Joint Venture, Finance Monthly speaks to Dr Solomon Osagie, Chief Legal Counsel for TSYS International,who led the legal team, Cameron McEvoy, Senior Legal Counsel and Kelley Knutson, vice president of TSYS International. Dr. Osagie’s team was responsible for the legal and regulatory aspects of the transaction – from due diligence, monitoring the triggers for the acquisition and guiding the processes and documentation for the purchase of The Merchants Group Limited’s stake in TSYS Managed Services EMEA Limited (TMS).
How was the deal structured? How long has TSYS been working towards this acquisition with TSYS Managed Services EMEA Joint Venture?
SO: The purchase of the shares was carried out through a straight Share Purchase Agreement with consideration comprised of several elements including trade deliverables and loan repayments. The purchasing entity was the shareholder in TMS. It was key to ensure that completion of the share purchase was conditional upon certain agreements being executed in a series of synced and related transactions (for example transactions relating to the transition of services provided by the outgoing shareholder’s group, employee matters and various intellectual property concerns).
What types of difficulties are often encountered during mergers and acquisitions in the financial services industry? How can these issues be overcome?
SO: The difficulties thrown up by this transaction included those that were IT/technology related. A key concern was also to ensure continuity of service provision, being mindful of the regulatory regime. My team was aware that certain aspects of the deal, for example those relating to a number of ancillary agreements had to proceed in as practical a manner as possible. Some of these agreements concerned conditions precedent to the acquisition and some had timelines parallel to completion itself.
For M&A transactions like these we had to be mindful of the mitigation of risks and the perceptions of consumers, clients, institutional as well as market participants.
As a team, the TSYS group was clear that the twin tasks of FCA authorisation and completion of the purchase were sensitive and required resources from a number of TSYS teams. Our objectives as a company were typical of what you would expect, not ignoring the need to maintain a sound, stable and effective system post completion as well as the value of the TSYS brand.
In what ways is becoming a wholly owned TSYS company going to impact the business and TSYS’ clients?
KK: First, from an existing Client perspective, we have already been receiving new enquiries regarding how we are approaching our FCA-approved TMS business going forward and the various areas we can support our clients’ needs from an overall call centre perspective. The ongoing impact of Brexit and its uncertain timetable, combined with the Bank of England lowering base rates, means that the overall financial services industry is looking for ways to streamline aspects of their back-office business while remaining compliant and future proofing themselves for on-going new regulation. Our investment in new technology, with specific focus on data analytics, digitalisation and risk management tools, is creating a positive dialogue with our Client base and they are keen to work with TMS to determine if our new operating environment can drive value to their own customers’ engagement. Clearly, our clients want to drive new value through an assortment of digital-based products and services and allow organisations like us focus on the best, more effective, way to drive operational efficiencies.
Next, in terms of new prospects, we are receiving new enquiries regarding an end-to-end proposition for smaller/medium-sized financial institutions and entities also want us to propose ways in which they can marry TSYS’ leading card processing technology with our own call centre operating model covering many aspects of the cards business.
Finally, both existing clients and new prospects believe that TSYS is the best, most complete, end-to-end provider of card solutions in the UK market and are pleased TSYS has made the appropriate on-going commitment, investment and resource allocation to ensure we can support our clients meet the needs of their end card customers as the market becomes more complex, competitive and challenging for all financial institutions in the UK market.
TSYS works with a number of high-profile financial institutions – how is the transaction going to impact the company’s relations with these clients?
KK: Without question, this move by TSYS in its TMS business has created a better engagement, more proactive dialogue and a highly valuable end-to-end service offering with the recent endorsement from the FCA for its call center services. We have truly moved from just another vendor to our clients to a true trusted advisor in various aspects of their cards and payments business. Our services are truly viewed as adding value to the end customer proposition and our service levels are at, or above, those of the clients we service.
Were there the key challenges / unique points to concluding this deal that you were faced with? How did you assist with overcoming them?
CM: The transaction coincided with TMS becoming authorised by the FCA to provide regulated consumer credit services. As Kelley says, we managed the application process in-house with Solomon’s team leading it. The coordination of these two processes (the acquisition and FCA authorisation) posed a challenge that our team took on aware of the balancing that was required. Solomon reminded us often to be aware of the coexistent challenges of the interests of the regulator as well as those of our clients and their commercial imperatives.
There were therefore a number of moving parts and time critical elements which required cohesive teamwork and good communication across the business and with our colleagues who all helped to make this a truly successful TSYS enterprise.