Selling Your ATM Portfolio – What Buyers Are Looking for Today
Like any business, ATM owners and operators (IADs) enter the business for the purpose of making money. Many purchase a few machines, find a few available locations and get started, eventually growing their business into a full-time business. Despite the business acumen and go-getter attitude required to get started, what most business owners – no matter the industry – fail to consider is an exit strategy. In fact, one of the most asked and most popular questions for ATM operators are about the valuation, sale and exits of their business.
We sat down with Jeff Sosville of ATM Brokerage to pick his brain about portfolio valuation, the state of the market and the variables involved when purchasing or selling part or all of an ATM business.
Triton: Would you say the market for ATM portfolios is favorable to buyers or sellers?
Jeff Sosville: Great question. I think it is a little of both at the moment – possibly hedging slightly toward a buyer’s market. On the “buy” side we are seeing nice opportunities due to traditional reasons such as relocation, retirement, etc. There are some ATM portfolios out there where operators have decided to sell rather than invest in EMV upgrade, though there are not too many of those left.
Sad to say, there are some owners who feel forced to sell right now due to the continued crackdown from government regulations and related banking regulations. This is a bit of a tricky time as we are seeing new entrants having a difficult time establishing banking relationships. Due to these challenges, the likely buyers are primarily established insiders who tend to drive valuations down.
On the “sell” side, the ATM market and business is still strong. There are many established ATM companies looking for acquisition targets and there are also new entrants looking to get into the ATM business.
I am a strong believer in the long-term value of the ATM industry and think it is an immediate cash-flow business that can be grown fairly easily and is fairly risk averse. The risk is mitigated through multiple locations so an owner can lose a location/gain a location and, typically, not lose an entire business for any reason.
Triton: How has EMV changed the buying and selling of portfolios?
Jeff Sosville: Last year we received quite a number of inquiries from ATM business owners who were considering selling due to EMV. Some of these did sell and some, after walking through a valuation, decided to make the upgrade and hold onto their business.
EMV continues to be an issue and, currently, we are writing in discounts or credits for EMV upgrade into the valuations. If a seller decides to sell and has not upgraded, we typically consider those costs in the sale and credit the buyer for some EMV costs.
Triton: Can you explain some of the variables that buyers are or should be looking for when purchasing an ATM portfolio?
Jeff Sosville: When purchasing an ATM business, there are several factors to key in on:
- Equipment – What is the status, age, make, model and EMV upgrade status? Is there one or are multiple manufacturers within the fleet? Maintenance on a new and upgraded portfolio with a single manufacturer is ideal.
- Contracts – Does the owner have contracts in place with their merchants? If so, how are the contracts written? End dates and automatic renewal clauses are important. The quality and validity of the contracts is important as well as the ability for the contract to be assigned to a new owner.
- Financials – The overall profit and loss as well as the current state of the business are essential. Is the business being run as an owner/operator, fully outsourced or processing only? We look at the details of the surcharge revenue, surcharge per transaction, interchange income and related buy rate. How much commission and/or merchant splits are being paid? How much margin is left after the owner pays their merchants? Then, it is important to review other expenses such as communication costs, fuel, parts, paper, labor, payroll and other expenses to fully understand what the business earns on an annual basis.
- Locations and Geography – Business location as well as ATM locations and relationships are important. Is there one large c-store chain with accounts or are they all independent locations? What type of locations are included in the portfolio – bars, taverns, c-stores, hotels? Where in town are they located – inner city, rural, suburbs? Then we look at the compilation of the route. Is everything in a 30 mile radius or is the portfolio a mix of locations over a much larger area? Time to service the route is key and a route with 20 locations within a 10 mile radius that can be serviced in five hours versus a 20 location route spread over a wide radius can make a big difference in valuation.
Triton: What advice would you give an IAD who is looking to sell?
Jeff Sosville: Buyers are looking for new, upgraded and well-maintained equipment. I recommend getting your equipment upgraded and EMV compliant. Also, if you have machines which are reaching the end of their life, consider upgrading the fleet.
Get all locations under contract – aiming for three to five years with an automatic renewal clause. Contracts on all locations and longer terms will keep your valuation in the higher range.
Get your books in order! I cannot stress this enough. The number one reason one portfolio sells over another is the presentation and organization of the books. Clean and organized, well presented books and financials make a world of difference when selling the business.
Lastly, take a good look at your numbers and locations and do your best to get rid of poor performers. Move the locations as close to home as possible and think about risk aversion. Don’t put all your eggs in one basket with one key client.
While there many more things that go into a complete portfolio valuation and the sale of ATM businesses, these key factors are a good jumping point for any entrepreneur looking to buy or sell all or part of their ATM portfolio.
A special thanks to Jeff Sosville of ATM Brokerage for taking the time to shed some light on the ins-and-outs of portfolio sales. For more information on ATM portfolio purchase and sales, visit www.atmbrokerage.com or call 888-430-5535.