Competition in the mobile payments space has continued to ratchet up. Those with leading technology are vying for market share, while legacy companies stuck on the outside are looking for ways to get in. For many, this will likely mean warming up the M&A machine and going shopping.
In one such deal, publicly-traded banking and payment tech provider FIS announced today that it signed a purchase agreement to acquire the remaining 78 percent of mFoundry that it did not already own. MFoundry provides SaaS-based mobile banking solutions to more than 850 retailer and financial institution clients, including Bank of America, PNC Bank, and Zions Bank. Clients use the company’s technology to power their mobile applications, digital wallets, and NFC payments technology.
FIS, which already owned 22 percent of mFoundry, will pay $120 million in cash for the remaining shares, valuing the company at approximately $165 million, including all remaining cash and outstanding options. The transaction is subject to regulatory approvals and is anticipated to close in by the end of the first quarter.
“Consumers have adopted the mobile channel faster than any other delivery channel in existence, and delivering industry-best mobile solutions is a vital focus area for FIS,” FIS president and COO Gary Norcross says.
MFoundry was founded in 2004 in Lakespur, California and has grown to 170 employees. The company raised a total of $40.3 million and was backed by GRP Partners, Apax Partners, Ignition Partners, Mastercard, Intel Capital, Motorola Ventures, Motorola Mobility, PayPal, NCR Corporation, and FIS. FIS (formerly, Fidelity National Information Services), has a current NYSE market cap of $10.9 billion.
“We were in mobile banking before the iPhone made it cool,” GRP partner and mFoundry board member Brian McLoughlin says. “This was a great exit for everyone involved.”
GRP led mFoundry’s Series B round and remains its largest venture investor. While McLoughlin couldn’t confirm his firms ROI, he indicated that it earned several times its investment. The exit comes at a good time for GRP which is in the final stages of raising its fourth fund. Today’s exit marks the 25th out of the 33 portfolio companies in the GRP II fund from which the investment was made. Preqin ranks GRP II No. 1 out of 150 vintage year 2000 venture capital funds.
The mobile payments space is still in its infancy, and there remains massive growth ahead. Late-stage startups like Square, Stripe, Authorize.net, Braintree, and Dwolla continue to innovate, while legacy players such as PayPal and NCR look to play catch up.
Given the competitive landscape and market potential, don’t be surprised if this marks the beginning of a highly acquisitive period in the space.