Commercial due diligence on payments service provider

Genesis partnered with an international DFI to conduct a commercial due diligence of Adumo, a prominent South African independent payments company, with a possible view towards an equity investment in another, similar business. 

Adumo offers payment solutions for small and medium enterprises (SMEs). Financing the company’s ambitions to expand would aid the DFI in driving digital payment acceptance uptake among SMEs in South Africa.

We analysed Adumo’s business model and structure after a number of discussions with its management as well as assessing its financial and operational performance over the past few years. We assessed projected revenues and expenses over the coming years and whether these were appropriate to provide our client with an independent view on the commercial viability of the company and its growth potential, while also conducting a SWOT analysis on the company.

In addition to Adumo’s internal context, we assessed the broader South African issuing and acquiring market. This included gathering data on card ownership and usage across South Africa and a number of comparator countries, including frontier, emerging and developed markets. In addition, we assessed the current usage of payment instruments in South Africa, including card usage, and projected these over a five-year time horizon based on market trends.

In addition, we sized total merchant turnover received through card payments across the South African retail trade sector, split across micro, small, medium and large segments, to estimate the potential revenue pool from card acceptance. Finally, we compared the company with a sample of competitors across a variety of aspects, from product offerings to customer experience to better understand where the company holds an advantage and where it is vulnerable.

Ultimately, the comprehensive insights from the research informed the client’s investment decision, which resulted in an equity investment. Click here for the announcement of the transaction.