A few weeks ago PACE Invoice, a multi-currency invoicing platform provider based in London was acquired by Flywire, a leading provider of international payment solutions based in the US. PACE Invoice graduated from the Startupbootcamp FinTech London 2016 program only six months ago.
As a startup, acquisition is always one of the potential outcomes, but it’s important to find the right partner. Acquisitions are often looked at in tangible terms such as product offering, geographical presence, distribution channels, but having a shared vision and true desire to work together to build something bigger and better is even more important. How does an acquisition actually happen? How long does it take and what are the crucial elements for both parties?
We had an in-depth discussion with Mike Massaro, CEO of Flywire and James Shattock, CEO of PACE Invoice to find out more.
What’s the core value of the partnership between Flywire and PACE Invoice?
Mike Massaro: Three things really.
- Complementary technologies that together, add more value for our existing clients.
- A group of like-minded people that we thought could lead the regional team focused on our Business segment.
- A set of marquis clients that our solutions (Flywire’s) could add real value for.
How did you discover PACE Invoice?
Mike Massaro: I was introduced to James via one of our UK FlyMates (what we call our teammates at Flywire). Our local UK team had met the PACE team through the L39 incubator and via different interactions on the local tech scene in London. The relationship grew pretty organically from there.
When setting up PACE Invoice, did you plan to be acquired in such an early stage?
James Shattock: As a startup, acquisition is always one of the potential outcomes, but it’s important to find the right partner. After diving in full time on PACE Invoice, and while fundraising, I had the opportunity to meet the Flywire team and quickly saw what being part of Flywire could mean for our team and our clients.
Were you considering other companies similar to PACE Invoice? Was it planned acquisition?
Mike Massaro: Flywire has made two previous acquisitions in the past two years — UniPay in the UK and ScholarFx in Canada. We get brought into a lot of M&A type opportunities, but we need to find the right fit – both people and strategy-wise — for us to pursue an acquisition. In 2016 alone we evaluated ~ 10 deals, some related to specific vertical markets, some related to technology acquisition, while others were more related to talent acquisition. If we feel something can add real value to what we’re doing, we’ll take a serious look.
Where is the payments industry moving? Where do you see your strength now when merged?
Mike Massaro: I think global Institutions (Schools/Universities, Hospitals, Businesses) all want payments to be simple for their customers and their own internal operations. They don’t want payments to frustrate their customers or distract from their core mission as an organization. At the same time, payments are becoming global. Organization need to be able to accept payments the way their customers want to pay — in-person, via eCommerce; marketplaces; international or domestic; via card, e-wallet, or bank payment. Payment companies that will be successful in the future will be able to meet these needs by delivering comprehensive and complete solutions. Our focus at Flywire is on providing the most comprehensive solution for cross-border payments. We want to make it easier for our clients and their customers to participate in the global economy by taking the friction out of the payment process.
How long was the negotiation/terms process starting from day one discussions?
James Shattock: Both companies had existing businesses to run, so after Mike and I spoke directly about finding some ways to work together, he invited the PACE team to come for a visit to Boston to evaluate potential partnership options. This was really intended to be a “get to know you” and frankly the teams just enjoyed spending time together and realized we shared a similar vision for cross-border payments and invoicing. After those conversations, it was clear that we wanted to work together, the question was really in what structure. The deal itself probably took three months or so to finalize on paper.
Why a UK based company, not US, given Flywire is based in US? Was it coincidence? Were you were specifically looking to expand outside the US?
Mike Massaro: The UK location was not a driving factor really. Flywire is a global business, and we have had a presence in the UK for the past five years. Today we have over 200 Clients in the UK & Europe. Our global headquarters are in Boston, but we have over 100 FlyMates (employees) outside of the USA across eight global offices, including London, Manchester, Valencia, Singapore, Shanghai, Tokyo & Sydney.
What next? Is your presence required in US or will you continue operating from the UK?
James Shattock: One of the key benefits of joining Flywire is that we can immediately bring another level of capability and service to our existing clients in the UK and Europe. The world-class payment network addresses real and current needs for our clients and Flywire’s global customer service organization is excellent. Those are huge selling points for new customers as well.
The focus of the PACE Invoice team will really be in the UK and Europe, but we are excited to also get the chance to visit Boston and Valencia over the coming weeks and spend more time with the rapidly growing Flywire team. The company’s global presence provides a really valuable perspective in terms of understanding the needs of our customers on all sides of a cross-border transaction and the unique requirements we find in different regions and types of institutions.
What’s your advice for other startups who are looking to be acquired by larger financial institutions? How to get the ball rolling? What does a business need to have to make it that far?
James Shattock: It was never our intention to court a larger financial institution but we were always aware that by going through the Startupbootcamp FinTech London programme we would gain much more exposure to potential clients and various financial institutions. If you are setting out to make a name for your company, then I think that this type of exposure is key. In addition, you need to make it clear that whilst you operate in a similar territory/discipline, you have a distinct USP. PACE and Flywire had approached the same problem from two different starting points and therefore had clear and complementary insights into how we could address important customer pain points without directly competing with one another.
What key factors were most important to you about PACE Invoice? What’s your advice to other startups who consider merging?
Mike Massaro: Flywire’s acquisition of PACE Invoice was a clear way for us to accelerate our growth in servicing businesses that have cross-border payment needs. But it would not have happened if it wasn’t for the close personal relationships we developed with James and the PACE Invoice team through the process. Acquisitions are often looked at in more tangible terms – product offerings, geographical presence, IP, distribution channels, etc. Those are important for sure. But the soft stuff – having a shared vision, complementary cultures, people synergies, a true desire to work together to build something bigger and better – are every bit as important. And they are often the difference between those acquisitions that really flourish vs. those that flounder.
You only graduated Startupbootcamp FinTech program 6 months ago. Do you think the program played any role? If yes, what kind of?
James Shattock: Yes! As I mentioned before, the Startupbootcamp FinTech program provided significant industry exposure and without that I don’t think we would have popped up onto the Flywire radar! It also equipped us with some of the business skills we needed. But more importantly, it provided important connections and introductions that helped us get the right advice to be able to handle the complicated process of selling a business. In particular, through Startupbootcamp FinTech, we were accepted to the Addleshaw Goddard Elevate program which gave us access to the right legal advice to guide us through the acquisition process. That was absolutely invaluable!
Want to know more about the opportunities in London and beyond for FinTech Startups? Join us on 13th July in London for our FinTech Social and Panel to celebrate London FinTech Week.