Earthport Bidding War

Have you ever even heard of Earthport, because I certainly have not? The firm specialises in cross border payments and its main advantage is the fact that the system allows banks and/or financial firms to move money across borders (this is all without having to liaise with local regulators and banks first). So, I can definitely see why large corporations such as Mastercard and Visa are now suddenly interested in bidding for Earthport.

Visa started the bidding war off with an initial offer of £198 million which was an all-cash offer. It’s not surprising to hear that Mastercard then gate-crashed the deal with an offer of £233 million. 

So why are these firms bidding for Earthport? I think it’s due to the synergies the firms recognise between themselves and Earthport, with all the companies being payment based. There hasbeen a recent influx in mergers and acquisitions in the payment industry which is mainly due to disruption in technology as customers turn to cashless payments, meaning card-based companies such as Visa and Mastercard have to play catch up. Disruptive technology has been identified as a common motive for mergers and acquisitions by researchers. Also, by acquiring Earthport the acquiring firm whether it be Visa or Mastercard would have quick access to information and Earthport’s expertise which they could implement in their own business. I think that because Visa and Mastercard are card-based this information would be useful to both companies and this would be of value.

Visa stated at the time of the initial bid that Earthport would be able to compliment the development of Visa’s payment solutions and would also be able to use Visa’s resources in order to aid the growth of Earthport, which I think is possible due to the expertise that Visa also has due to it being a large multinational corporation. Earthport seemed to have also identified the synergies between the two companies as they identified that the all-cash offer would have a desirable immediate return for their shareholders and recognised the common ground which both companies shared. 

However, when Mastercard gate-crashed the party.

The fact that Earthport’s shares dropped by 26% and the business had just lost a major competitor may have contributed to its vulnerability in terms of a takeover. However, with the initial announcement of Visa’s offer, there was an 28% increase in Earthport’s shares, so it is clear that Earthport is doing well with the new buzz surrounding the bidding war.