The First Data buyout by KKR for about $27 billion won easy approval last week from European authorities. Today, MasterCard’s market cap of $13 billion is almost exactly half the amount that KKR will pay for First Data. Although Visa’s upcoming IPO is expected to fetch a significantly higher valuation than MasterCard’s, First Data will still be bigger. For now. MasterCard’s market cap has quadrupled since it’s IPO, and the share price continues to grow much faster than First Data’s. Visa’s market cap could also grow faster.
How long will First Data remain significantly larger than the payment networks? Should First Data leverage its size to create a competing payment brand? Or should First Data buy up one of the existing networks? Is there enough cash in the investment community to fund a First Data buyout of MasterCard? How fast would that need to happen before the acquisition becomes too big? And at what price premium, given the market’s positive exuberance for MasterCard?