Can FleetCor build a well-oiled machine from its M&A parts?

FleetCor Technologies, whose peers with fleet-card roots include WEX and U.S. Bank Voyager, has been on an M&A streak that netted several B2B payments specialists in areas that take FleetCor in new directions, as rivals also diversify.

One example is Nvoicepay, a corporate accounts payables firm FleetCor bought last year as part of a $255 million deal, two years after buying cross-border payments specialist Cambridge Global Payments, which it picked up in 2017 for $690 million.

Early next year FleetCor plans to finalize its latest purchase, Los Angeles-based Associated Foreign Exchange(AFEX), for around $500 million, which overlaps with Cambridge in cross-border payments and currency-hedging services.

The moves cause some to wonder if the latest M&A targets of Atlanta-based FleetCor—a $3 billion company with massive operations in commercial payment verticals serving fleet cards, lodging, toll payments and petroleum—mesh well with its core businesses.

“Global cross-border payments is a growth market, and I can see why FleetCor finds it attractive, but it’s not clear to me where the synergies with FleetCor’s fleet card businesses lie,” said Eric Grover, a principal with Intrepid Ventures LLC.

There is a method to the madness, according to Mark Frey, longtime president of Canada-based Cambridge, which derives about a third of its revenue from currency-hedging along with global corporate cross-border payments.

Cambridge and Los Angeles-based AFEX are in similar businesses but operate in different regions. Putting them together under FleetCor’s umbrella is more useful for corporations looking for an all-in-one global solution, Frey said.

“Cambridge has a bigger North American footprint and AFEX brings in new geographies with additional currency-hedging operations in Europe, Hong Kong and Singapore to create a better global balance,” Frey said.

FleetCor’s overall strategy is to unite adjacent B2B payment specialists and gradually expand its market share by offering existing customers new global services for cross-border and supply-chain payments through its network of subsidiaries while exposing smaller companies to FleetCor’s larger corporate customers.

“FleetCor has opened up all kinds of doors for us, so we can onboard much larger companies that see us now because of FleetCor’s scale,” Frey said.

The question now is whether FleetCor can make a cohesive machine from bolted-on parts, and Frey said it’s a process that’s naturally following corporations’ growing global operations.

“We see ourselves carving out a niche where we operate between large financial institutions that focus on international banking and the smaller fintechs, where we leverage the heritage of a very large corporation in FleetCor but we’re nimble enough to quickly build and roll out payment solutions for companies in growth mode,” Frey said.

Cambridge recently announced a pilot with Bangkok’s Siam Commercial Bank enabling businesses around the world to make real-time payments in Thailand through blockchain technology.

“We expect to roll this out to around 10 currencies by the second half of next year,” Frey said.

For FleetCor, monetizing its acquisitions through its expanding base of customers will require discipline and strategic collaboration.

“There are always M&A integration risks, but in general FleetCor has done well with its deals ,” said Ali Raza, a senior advisor and consultant at Atlanta-based FSS.

So far FleetCor’s various subsidiaries like Cambridge continue to operate successfully on their own, and FleetCor has the opportunity to leverage new sets of capabilities from companies it’s bolted on through strategic management, Raza said.