The Hidden Value of Payments in Private Equity

Private equity firms know how to find value in software, but too often, the payments opportunity hides in plain sight.

Whether you’re underwriting a new deal or optimizing an existing portfolio company, payments can quietly add (or erode) millions in enterprise value. That’s where Forward comes in.

We are fortunate to work with a number of leading private equity firms. We engage in three primary ways: deal pursuit, IC model, and post-investment execution.

• Deal Pursuit – it turns out selling money to the best software companies is very competitive. Top performers will have 5-10 funding options and the luxury to select the partner they feel can help them achieve their vision. Forward is called in, as partners of the investor to clearly articulate the payments upside to the founder/management team.
• Investment Committee (IC) Model – each investment a PE firm makes will traverse its way through IC and require a model with various cases to justify making the investment. Even for very large funds, the payments revenue line is often a “best guess” or thought of as “upside” to the base model. We help partners, principals and associates dial their models so they can trust their payments numbers (and sometimes be more competitive with their bid).
• Post Investment Execution – Inside most private equity portfolios there are 8-10 companies that could double their revenue (ARPU) by executing payments correctly. They are deriving some revenue from payments today, but their attach rate is 2x-3x lower than possible and they are being charged 2x-3x more than they should be. Forward engages, first with our Maximize offering and then our Rails offering to execute a tried and proven payments playbook to drive enterprise value.

When we started working with private equity our working assumption was that our skills and offering would be most valuable to smaller funds – the types of funds that did not have a full time payments expert on their value creation team. As we’ve partnered with 100m – 10B+ funds, we’ve come to understand its less about size and more about bandwidth. We give private equity investment professionals leverage on their time and ability to “hand off” payments and be confident the strategy will be executed.

We measure everything at Forward (a very KPI, data driven shop), and one of the statistics I’m most proud of the team for generating is PE repeats. When we work with an investment firm – just one time – for as little as 3 months – we begin seeing a flow of new payments challenges to solve.

A huge thank you to our existing investor partners. And if we haven’t worked together yet, give us a ring and find out what your “competition” has already discovered.

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