Assessing the purchase of AFEX by FLEETCOR: Insights on the transaction's implications and effects on both companies.
FLEETCOR Acquires AFEX: Consolidating the B2B Cross-border Payments Industry
In a strategic move, FLEETCOR, a leading $20 billion payments company, has announced the acquisition of AFEX. The deal, yet to have its sale price formally reported, is expected to be around half the size of the Cambridge deal in terms of revenue.
AFEX, one of the few remaining independent B2B players of scale, had an annual payment volume of approximately $20 billion before the acquisition. FLEETCOR paid around $675 million for the acquisition.
John, FLEETCOR's CEO, believes that fragmented industries consolidate over time. This acquisition is part of FLEETCOR's ongoing strategy to bring scale, accelerate growth, or introduce new product capabilities.
The integrated company is expected to operate under the broader FLEETCOR brand. FLEETCOR intends to leverage its M&A integration experience to drive up margins. After the acquisition, FLEETCOR will likely integrate AFEX with Cambridge, another acquisition made by FLEETCOR in 2017 for $690 million.
The B2B cross-border payments industry is highly fragmented, with Cambridge plus AFEX forming a business of significant scale. Although second to WUBS in terms of revenue, this combined entity is growing much faster.
FLEETCOR aims to improve the efficiency of its distribution model, focusing on data-backed human sales interactions. To target smaller corporates, FLEETCOR will partner with fintechs such as Bill.com and KyckGlobal.
However, the acquisition of AFEX is not without its challenges. FLEETCOR posted a $90m Q1 2020 hedging loss from Cambridge, which had too much concentration in one exotic-weighted customer. New processes are being implemented to avoid a repeat of this loss.
Despite this setback, FLEETCOR targets the smaller end of the Fortune 1000 and aims to double operating profit in four years. The goal of any acquisition is to achieve this objective.
In conclusion, the acquisition of AFEX by FLEETCOR marks another step in consolidating the B2B cross-border payments industry. With its focus on data-driven sales interactions and strategic partnerships, FLEETCOR is poised to continue its growth trajectory.
