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Inside Visa’s Acquisition Strategy

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Value addition

In a conference on November 29, 2017, Vasant Prabhu, Visa’s (V) CFO (chief financial officer), stated that the company’s acquisition strategy focuses on businesses that add value. He stated that making investments in businesses that aren’t directly related to Visa’s business wouldn’t be profitable for the company. At the conference, management also reflected a positive view regarding the Visa Europe acquisition.

Visa has stated that it doesn’t make investments in businesses just for the sake of revenue growth. Instead, it says it invests in businesses that positively affect its core business in the long term.

On an LTM (last 12-month) basis, Visa posted a price-to-sales ratio of 14.08x. Its peers (XLF) Fiserv (FISV), Total System Services (TSS), and Vantiv (VNTV) posted price-to-sales ratios of 4.88x, 3.05x, and 3.36x, respectively.

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Buying technologies

According to Visa’s management, making the purchase of certain technologies that would be beneficial to the company in the long term could be a value addition. The company also said it would buy businesses that could positively affect its relationship with its customers.

What’s ahead for Visa?

Undoubtedly, fiscal 2017 was the year in which the scope for digital payments was visible. Moving forward into fiscal 2018, Visa is expected to witness strong growth, mainly on the back of a positive outlook in regard to the global economy. Also, the trend of digitization and a shift toward online payments from cash payments is expected to show upward momentum.

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