Credit Card Portfolio

You’ve built a solid, credit card portfolio which resulted in your being pursued by a number of companies. Now, after months of research, you’ve settled upon a price for your portfolio and feel like you’re on your way to getting a deal. First, congratulations. But…..

What details should you think about when preparing your company and credit card portfolio for sale:

If you are being pursued heavily and are serious about selling all or part of your credit card portfolio, here are a few details that can complicate, hinder or stop the deal. Therefore, you should think and talk about these things with your executive team now so that you are ready.

Staff communication during a credit card portfolio acquisition

If someone is serious about purchasing your credit card portfolio, your key players will have to be made aware of the potential for acquisition. That said, you need to use discretion when communicating a potential sale.  Try to keep communications with senior members on point and confidential.  No one in the office benefits from communicating hypotheticals and possibilities before the details are agreed upon.  That said, people talk, and soon the office will be abuzz about the possibility of this change. Therefore, going forward, transparency will be key to a successful sale and transition.

In any business merger or acquisition, many employees will have a fear of losing their jobs.

This is something you’ll want to consider when deciding who to sell your business to. If your team has been with you for a while you’ll want to know what the buyer’s plan is for your staff. Will they keep all of your team, or will they only keep the executives?  Will the executives have to take a lesser role if merging with an already established team? Or, do they plan to let everyone go?  In any event, you owe it to your team to be forthcoming with the buyer’s decisions and have preparations made to communicate exit plans/compensation with those affected.

What kind of relationship will you have with your current customers after the sale?

More than likely, the good rapport you have with your customers is one of the things that made your company and credit card portfolio attractive to many potential purchasers. Once it is sold, what will be your continued relationship with the merchants look like? For example, will you still provide service, or will your role be totally eliminated? If you will no longer service the customers, who will? How will the customers be told about the change? This is important if you have other lines of business with them such as gift cards, surcharge programs, leases, etc.

Start gathering data now for vetting and negotiations.

If you’re working with a consultant or broker, you’ll need to make sure they have access to important residual data and records that the purchaser will need for analysis and the valuation process. It is probably a good idea to create a data room in which to keep this information for easy access during vetting, negotiations or after closing. This includes contracts, financial statements, legal documents, employee records, contracts and/or leases. You can even put together a “due diligence” checklist to anticipate what questions/answers a potential buyer might ask.

The best scenario is to get multiple bidders, and if you look unorganized because you take too long to turn over documents, this can be a turnoff to potential buyers. You want to be upfront, honest and well-organized when providing requested documents. In order for a Buyer to complete a full analysis for valuation and subsequent proposal, LOI,  and purchase agreement, the following items will be necessary for you to provide.  Work with your attorney to ensure confidentiality through non-disclosure agreements.  It can be uncomfortable sharing your proprietary data, but understand that it is required and necessary for accuracy in the valuation process.  At a bare minimum, you’ll need to provide twelve months of detailed, unredacted residual files in csv or xls format.  It’s from these reports the acquirer determines credit card portfolio health and trends in order to provide the seller with an accurate evaluation.

What will be the timeframe for the transition?

Depending upon the size of your credit card portfolio, the vetting process might take some time. Even after the Buyer has decided to purchase all or part of your business, negotiations and preparing for close could take a couple more months. Many of the delays stemming from attorneys and processors preparing and signing off on all documents.  Consequently, you’ll need to keep everyone motivated and content throughout the process. Because in truth, before you have an executed agreement nothing is guaranteed.  You need to maintain the operations of your business and the strength of your credit card portfolio.  It’s easy to get distracted by the portfolio sales process.  Make sure it doesn’t take away from your day to day.  The more you can maintain your routine the more it helps keep employees focused on their responsibilities and tasks instead of the potential what-ifs.

Make sure your broker or legal representative includes all of these details in your written agreement. They should spell out all of the terms leaving nothing to question.

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