Brazilian Acquirer Buys MeS for $670 Million 

July 6, 2012

Brazilian merchant acquirer Cielo S.A., the largest in Latin America, agreed this week to acquire Redwood City, Calif.-based acquirer and processor Merchant e-Solutions (MeS) for $670 million. Cielo, which processes payments for 1.2 million merchants in Brazil representing 50 percent of the payments market, did not have a U.S. presence prior to its holiday-week announcement, but the deal was driven much more by technology than geography, according to Kevin Gallagher, general manager of e-commerce for MeS.

“What they needed, not only in Brazil but globally, is state-of-the-art technology for their future platform,” says Gallagher. “Their current platform is a bit older and not quite where it needs to be now and in the future. They spent two years looking at quite a few companies around the world and our platform was a huge key for why they wanted to acquire MeS.”

In a press release, Cielo noted MeS’s platform offers end-to-end service for retail and e-commerce merchants, better customer service through Web-based reporting, better integration with the distribution channels of its partner banks and a more robust e-commerce solution for that fast-growing segment in Brazil. Gallagher also points out that Cielo benefits from acquiring a profitable company—not always the case when a company’s priority is to upgrade its technology.

“We’re also a very profitable merchant acquirer as a standalone company. So, for Cielo, it’s the best of both worlds,” he says. “They get an acquirer that’s immediately accretive to their revenue and they also get exactly the technology and the structure they’re looking for versus buying a startup that has great technology but is bleeding money or one that’s making money but whose platform is old.”

Until recently, Cielo and smaller rival Redecard operated a virtual duopoly in Brazil’s $300 billion payment processing market. As the country’s government has opened the market to foreign competition, both companies are reportedly looking to diversify their services. According to Gallagher, the acquisition of MeS gives them the technology platform they need to enable Brazil now, but also one that will help them grow in the U.S. and in other parts of the world in the future.