About me: c15 years in banking and finance. Currently product director for one of the big payments players.
My day job is a business role enabling regulated payments products. Everything from x-border, openbanking, crypto to card solutions. I also have team members that assess m&a.
Here is my view on why I think equals maybe hard to sell:
- European expansion. This expansion isn't positive and you should expect significant margin errosion. The nbb (my team deal with regularly) are hugely complex and challenging. They will insist on significantly robust controls, onsoil requirements which will increase the overheads. Note equals are already eluding to this when they talk about increasing compliance and headcount in Europe. Espcially given equals has consuner facing.
-Capability and footprint is nothing special- everyone has multicurrency Iban, sepa instant, APIs etc. The way you get traction is having a network effect. B2b want to deal with Limited number of counterparties to reduce costs and complexity. The more licenses, currencies and reach the better, it also means higher costs given different regulators have different requirements. The EU in particular is one of the worst places to do businesss because the huge volume of ever complex regulations, highly competitive and low margin. From what i can see Equals foot print is fairly limited.
- Confused OP model preventing scale. Offering direct to consumer, BAAS (banking as a service) and b2b is not globally scalable. The reason is you get brought into the scope of consumer legislation which is significantly more onerous and unless you find a clever and more complex way to disintermediate the 2 you are looking at higher costs. Regulators do not like mixing the 2 either. As we have seen over the last decade or so where regulators have been forcing companies to ring fence retail and commercial.
Summary
The above doesnt mean they wont sell, There could be a niche consumer business thats looking for expansion to b2b or visa versa.
Plus Equals is also profitable for now, which is great. Can they scale and maintain margin? ( i doubt it and the equals board probably know that, maybe thats why they are selling)
If my company was buying we
would have to break it up ditch the consumer bits re-org and try and integrate the b2b. Which would probably cost another 20 to 50m to execute.
