In payments, that’s not enough.
The buyers and capital allocators we work with — from North America to the Gulf, across Europe and LATAM — are looking deeper. They’re underwriting residual decay curves, mapping merchant churn, checking for high-risk MCC exposure, and adjusting price based on processor dependency, contract terms, and operational scalability.
If you're a founder, operator, or investor in merchant acquiring, payfacs, ISO platforms, or embedded infrastructure — here's what matters now in this market.
Residual revenue remains the anchor of value in payments transactions. Buyers want to see predictable, diversified, and sustainable net residual income over time.
Key Metrics:
Best Practices:
Globally, channel structure plays a huge role in perceived stability:
Channel Type
Buyer Preference
Rationale
W-2 Direct Sales
High
Greater control, easier post-close integration
ISO/Sub-ISO Models
Medium
Acceptable with strong contracts + incentives
Independent Agents
Low
Risk of churn; no IP tie-in, low contractual coverage
International Note: In Europe and LATAM, many agents are technically contractors but treated with greater loyalty and embeddedness. Still, concentration risk (e.g., top 3 reps >40% of volume) gets flagged in diligence.
Merchant churn is often poorly understood and underreported — but it’s one of the first things we dissect.
What buyers want:
Target Benchmarks (Global):
Buyers price in risk based on merchant type — and average ticket size is often a proxy for both margin and volatility.
Metric
Why It Matters
Average Ticket Size
Impacts interchange spread and chargeback exposure
MCC Distribution
High-risk codes (e.g., 5944, 5967, 7995) reduce valuation
Cross-border vs. domestic mix
FX risk, settlement issues, and compliance burdens
Best Practice: Classify your merchant base into MCC tiers (low/medium/high risk) and show proactive monitoring or reserve strategies.
Residual concentration is a value limiter — especially in carve-out scenarios.
Checklist:
What we recommend:
Structuring isn’t back-office work. It’s central to value realization.
Most common issues we flag:
International nuance: In Europe and LATAM, exclusivity often appears buried in partner bank agreements, while ROFRs are less prevalent — but diligence expectations are tightening.
After a successful raise — especially with structured or non-dilutive capital — what you do next drives enterprise value.
Smart post-raise priorities:
Common mistakes:
Pro tip: Build a capital allocation map with forecasted impact by metric (CAC, NRR, ARPU) and review quarterly.
Tech is not an overlay. It’s a value multiplier — when it aligns with retention, scale, and cost efficiency.
Capability
Valuation Impact
Strategic Benefit
Real-time residual dashboards
+0.5–1.0x EBITDA
Improves buyer confidence, lowers DD friction
API-based underwriting
+0.5–1.0x
Faster onboarding, lower ops cost
POS / ISV integrations
+1.0–2.0x
Drives merchant retention, enhances platform leverage
Merchant-level risk scoring
Contextual
Monetization of underbanked segments (esp. in SMB lending)
You don’t control the market. But you do control how prepared you are when it’s your turn at the table.
The best operators we work with — from Toronto to Dubai to São Paulo — are the ones who:
If you're at a moment of inflection — looking to scale, restructure, sell, or raise — I’m happy to talk.
Because getting this right takes more than optimism. It takes precision.
—
Tom
