MoneyGram's many suitors

February 17, 2022 11:46 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

MoneyGram's acquisition was years in the making — the only question was who would be the one to take over the company, which has been up for sale for most of the past decade.

The winner appears to be Madison Dearborn Partners, a Chicago-based private-equity firm that plans to take the money transmitter private for a price of $1.8 billion. The deal is expected to close in late 2022, though it could still fall through given a monthlong "go shop" period during which MoneyGram could find another suitor willing to pay a higher price.

An upset wouldn't be unprecedented, since MoneyGram has come close to being acquired before, only to see the deal fall through. And the company's scale and digital prowess make it an attractive target for anyone in the M&A market.

Here are some of the companies that have either made a bid to buy MoneyGram or have been rumored to be negotiating one.

Madison Dearborn Partners

MDP's MoneyGram deal, which would result in MoneyGram becoming privately held, could provide the money transmitter with the funding it needs to make moves into mobile technology, blockchain and other emerging payment opportunities.

It also signals a possible move beyond MoneyGram's reliance on agents, according to Meng Liu, a Beijing-based analyst at Forrester Research.

"MoneyGram has been an acquisition target in the last [several] years," Liu said, adding upgrades in cross-border payment infrastructure, the presence of numerous fintechs and the rise of cryptocurrencies are creating new options to move money quickly between nations. "These digital currencies have already proved they can partially solve the speed and cost issues from cross-border payments," Liu said.

MDP has invested in payment companies in the past, including PayPal.

Western Union

Bloomberg

Before digital money transfer technology firms flooded the market, MoneyGram's primary competitor was Western Union, and word spread of a potential Western Union acquisition of MoneyGram in 2020.

Both Western Union and MoneyGram have huge agent networks for their industry's traditional reliance on physical locations to send and receive funds. Western Union has more than a half million agents and Moneygram has more than 350,000. Western Union has also added digital services, partly through a deal with Amazon Web Services to power mobile and web transfers.

While the acquisition never happened, a Western Union/MoneyGram combination could have cut the number of agents in redundant areas — both companies have locations inside Walmart stores, for example.

And even with the move to digital, there is still an argument for maintaining a brick-and-mortar network, since fintechs typically can't match that model at scale.

"Money still has to get in and out of the network, and that’s most likely cash if the users don’t have bank accounts," said Gareth Lodge, a senior analyst at Celent in London.

Ant Group

Bloomberg

Ant Group, the affiliate of Chinese technology and e-commerce giant Alibaba and the operator of Alipay, had an $880 million deal in place to acquire MoneyGram in 2017.

By acquiring MoneyGram, Ant would have gained greater access to the U.S. market, supporting peer-to-peer transfers and other payment types.

But the deal was under political pressure from the start. The Trump Administration had taken a hard line against Chinese companies doing business in the U.S., a posture that posed hurdles for a variety of firms including Tik Tok, WeChat and Huawei.

In the case of Ant, the political pressure scuttled the MoneyGram deal, complicating Ant's ability to offer products in the U.S. beyond the digital wallet that allow travelers from China to make purchases from U.S. merchants using Chinese currency.

Even after the deal fell through, Ant continued to work with MoneyGram in Asian markets.

Euronet Worldwide

Bloomberg

Ant had competition in its bid to acquire MoneyGram. Euronet Worldwide, a Leawood, Kansas-based digital payments company, offered to pay about $1 billion for MoneyGram in 2017.

Euronet hoped to capitalize on what it called complementary distribution channels that would help both brands compete in a fragmented global money transfer market. Euronet also argued that its focus on independent agents and menu of consumer payment products, combined with MoneyGram's presence with larger retailers, would allow the combined firm to handle payments across digital and physical locations.

Euronet did not win in its bid to acquire MoneyGram, though its interest reportedly resulted in Ant raising its own offer for the transfer service.

Ripple

Adobe Stock

The blockchain technology company was rumored to have struck a deal to acquire MoneyGram in late 2019, a purchase that would have helped Ripple's international payments strategy, according to industry speculation at the time.

Ripple has used the technology that underpins the XRP digital token to power cross-border payments without the need for third parties such as correspondent banks, removing time and cost for international payments including remittances.

Ripple is a key player in the growing market of alternatives to traditional money transmitters like MoneyGram, though the two companies saw each other as partners.

MoneyGram in 2019 signed a contract to use Ripple's blockchain to boost foreign exchange settlement for international payments. The deal also saw Ripple investing $30 million in MoneyGram, including new common stock and an option for Ripple to boost its stake in the future.

The Ripple/MoneyGram partnership ran into trouble in 2021 when MoneyGram pulled out of the Ripple platform during Ripple's battle with the Securities and Exchange Commission over how the XRP token should be regulated. Ripple later announced its partnership with MoneyGram was completely severed.

Advent International

In addition to MDP, MoneyGram has also been pursued by other private equity investors. Advent International Corp. and Siris Capital Group also reportedly made recent bids to acquire MoneyGram, according to Reuters.

The Boston-based Advent focuses on technology companies that provide digital payments, authentication and security. Advent's portfolio includes several payment companies such as Global Processing Services, a London-based payment processor for digital banks such as Curve, Starling Bank and Revolut. Other investments include Planet, a London-based digital payments company; Brazilian e-commerce payments company Ebanx; and U.S.-based application programming interface providers Shift Technologies and Salt Security.

Siris Capital Group

Reuters' report on the recent private equity bids to acquire MoneyGram included Siris Capital as a possible suitor. The New York-based Siris Capital Group's investments include Digital River, a Minneapolis-based company that offers hosted software for payments, e-commerce and marketing for direct-to-consumer businesses.

Siris acquired Digital in 2015, and over the past seven years has divested "non-core" businesses such as BlueStream Internet Commerce and BlueHornet, an email marketing company.

Carlyle Group

Adobe Stock

New York-based private equity firm Carlyle Group has been reportedly in talks to acquire MoneyGram as early as 2013.

Carlyle Group has more than $162 billion in assets under management and more than 270 active portfolio companies.

Carlyle has also invested in Ant Group, the same company that had a deal in place to buy MoneyGram in 2017. Carlyle has also taken stakes in MoneySquare Holdings, Vantage Group and SBI Card.

Bain Capital

Adobe Stock

The Boston-based Bain Capital was part of a group of potential MoneyGram buyers in 2013 that included Carlyle as a competitor, though a deal was not done as MoneyGram at the time chose to remain public.

Bain Capital's private equity investments in the financial services sector include Axis Bank, a Mumbai-based internet bank; and Nexi, a Milan-based payments company.

Nexi has worked with partners such as Nets to build a multinational payment gateway and merchant acquiring network in more than two dozen European countries.