Dive Brief:

• As payments and software company Flywire actively scans for acquisitions across deal sizes, the company is considering how absorbing another business might affect Flywire’s growth rate, said CEO Mike Massaro.
• Flywire has done two deals as a public company and one prior to its May 2021 initial public offering that were on “the smaller side,” in the price range of $40 million to $150 million, Massaro said during an appearance at a recent investor conference. He classified the medium size as those in the $500-$600 million range, and large acquisitions priced above that. “We’re looking for great deals in all of those categories,” he said.
• However, Massaro noted the importance of finding a potential target that is either growing at a rate that won’t negatively impact Flywire’s pace, or one that “can accelerate through synergies.”

Dive Insight:

Boston-based Flywire focuses on payments in the education, healthcare, travel and business-to-business verticals. The company sells its software and payment services to clients in those verticals, where large, cross-border payments have been slower to digitize and often involve complex software, Massaro said during his appearance on May 24 at the JPMorgan Chase technology, media and communications conference. 

To help grow its global footprint, Flywire acquired Australian company Cohort Go last July, and the U.K. company WPM in December 2021. Terms of those deals were not disclosed.

Across the industry, merger and acquisition activity is expected to increase this year, given the funding challenges many payments and fintech companies have faced, and now that valuations have declined over the past year.

In scouting for another purchase, Flywire is considering whether a would-be target could further the company’s position in an existing vertical or geography, bring Flywire to a new industry or location or arm the company with a product it can upsell to its existing client base, Massaro said during an interview last week. 

He named real estate and venture funding or private equity transactions as other industries ripe for digitization that could present opportunities for Flywire. 

The company’s technology is used by clients in 35 countries. Massaro identified Latin America as a region where the company is investing for growth. It currently has fewer than 10 employees there.

To assess acquisitions, the company evaluates a potential target’s technology. “Is it a tech disaster, or is it something that we feel like we can consume and standardize the tech behind it?” Massaro said during the conference. 

Flywire doesn’t want to jeopardize its platform by grabbing old, outdated technology, he said. “It's always a lot of work to consolidate platforms and standardize systems that people are using,” Massaro said. “We don't want something that’s 20-, 30-year-old tech that we have to really put a huge lift into.”

The company also considers the potential impact to its own financial metrics and growth trajectory, Massaro said. If Flywire were to buy a business growing at a third of its rate, “it's going to obviously pull our growth rate down significantly,” he said. “That’s a huge consideration when you do a big deal.”

Cost-cutting at some payments companies is likely to make them more attractive acquisition targets, according to a QED Investors partner.

Plenty of private companies continue to lose money, Massaro pointed out. Given the earnings before interest, taxes, depreciation and amortization margin expansion that the company has laid out, Flywire doesn’t want to take on a purchase that seriously changes that trajectory, he said.

Armed with that checklist, Flywire has a team devoted to finding qualifying targets, but the company is patient, he said. “We think there are those deals out there,” Massaro said.

Earlier this year, an analyst note mentioned Flywire itself as a possible acquisition target. Massaro declined to comment on whether the company has fielded any interest from would-be buyers this year, adding that Flywire is focused on continued growth.

The company has experienced interest from all types of companies in the last dozen years, Massaro said. “Would never say never, but at the same time, not a top priority for us at all,” he said. “We'll just keep executing and whatever happens, happens.”

Flywire reported its payment volume jumped 36% in the first quarter, to $5.7 billion, according to a filing with the Securities and Exchange Commission. The company reported first-quarter revenue rose 46%, to $94.4 million, and it recorded a loss of $3.7 million in the quarter.