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Card Shark: VeriFone's Rise to Point of Sale Supremacy

Douglas Bergeron was focused in the fall of 2010 like a laser on a single goal — orchestrating his company's hostile acquisition of Hypercom Corp. Bergeron had already built VeriFone Systems Inc. into a force in point of sale terminals. Its card-reading devices graced countertops of retailers in dozens of countries.

Buying its rival Hypercom, however, would add a major European presence and help Bergeron cement VeriFone's position as the premier global intermediary between consumers and the likes of Visa, MasterCard, American Express and even Google.

Yes, the buyout was attractive. But there were hurdles. They included antitrust concerns, pushback from VeriFone's investors over the risks and cost and Hypercom's own litigious streak.

Bergeron's lawyers took one look at the deal and in unison told him the same thing: fuhgeddaboutit.

Bergeron didn't listen. He spent a year in intense negotiations, turned a $280 million hostile bid into a friendly one of $485 million and, ultimately, completed the takeover.

Now VeriFone claims it could add $350 million in revenue in fiscal 2012, precisely where Bergeron wants it. "We're right at the center of all innovation, buying companies bringing out new products and new services," he says. "If we were sitting around trying to sell 1990s terminals, we'd be in deep trouble. Instead, we're at ground zero" of the payments revolution.

Since his earliest days, Bergeron has defied the odds and refused to listen when told he can't do something. He's a native of Windsor, a town in Ontario across the Detroit River from the Motor City. When he was a child his father, George, who worked at an auto parts factory, was diagnosed with multiple sclerosis, which sent him on a trajectory in his thirties from a cane, to crutches, to a wheelchair. His mother, Eleanor, worked for Avon Products while George stayed home and raised Bergeron and his siblings. She tells the story of how Doug, then around 10, pushed to the front of a crowded mall parking lot to shake hands with Pierre Trudeau, at the time Canada's prime minister. "He proceeded to say how he was going to be prime minister one day," Eleanor recalls.

The first member of his family to go to college, Bergeron, who is 51, helped pay his way to a computer science degree at Toronto's York University playing accordion at wedding receptions and bar mitzvahs. After graduating, Bergeron went to work for Northern Telecom in Ottawa and won a company scholarship to study systems management at the University of Southern California. He then took a job with SunGard Data Systems Inc., rising to become chief executive of SunGard's brokerage systems group and president of SunGard Future Systems.

In 1999 he was hired as the turnaround chief of the troubled Toronto software company Geac Computer Corp. Ltd. During his tenure, Geac, which he said focused on Y2K software, never turned around.

"What failed to occur to me in my due diligence is asking, How much software is this company going to sell in July of 2000?" Bergeron recalls. "None."

Geac eventually turned around, but without Bergeron. He was fired after 16 months.

The same day he lost his job at Geac, Bergeron got a call from the private-equity billionaire Alec Gores. By the next Monday Bergeron was in Los Angeles, working as a group president with Gores Technology Group, now the Gores Group. (The Gores Group's purchase of the U.S. business of Hypercom allowed VeriFone to buy the remainder.)

It was while working for Gores that Bergeron came upon VeriFone. Founded in the 1980s, the company grew on the back of its Zon and Tranz lines of terminals, which helped merchants convert from paper-based transactions to electronic payments.

VeriFone, of San Jose, Calif., had been publicly held for seven years until Hewlett-Packard paid almost $1.3 billion in stock for it in 1997. A culture clash ensued, and HP's ambitions to use VeriFone as a springboard to dive into the electronic payments business flopped. In 2001, the savvy Gores bought VeriFone from HP for $50 million via $5 million of equity, $35 million of debt against receivables and a $10 million seller's note from HP.

Gores put Bergeron, who was then a partner in the private-equity firm, in charge because he was the only person in the shop with experience running a technology outfit of 1,400 people.

At the time, Bergeron put down $500,000 to buy 10% of VeriFone. He said he immediately cut the company's head count to 800 and set off to meet VeriFone's customers.

With VeriFone again solidly profitable, the Gores Group and Bergeron sold an 85% stake for about $160 million in June 2002 to GTCR Golder Rauner LLC, a Chicago private-equity firm, and Bergeron himself. Bergeron reinvested some of his profits in the Gores sale into the GTCR deal, and coupled with the new carried interest he received as being CEO, he effectively maintained his 10% stake. Three years later, VeriFone's owners took it public. Bergeron has since cut his stake ownership to 3% by selling about $200 million in stock. Today his stake in VeriFone is worth about $120 million, he says.




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