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Easy Merger & Acquisition

Payments in Panama

#Financial Services
ProHub Comment

This is a structured M&A case requiring candidates to calculate target company revenues using market share data, identify cost synergies through detailed cost analysis, and make a GO/NO-GO recommendation with financial justification. The case tests analytical skills, ability to work backwards from market data, and structured problem-solving around acquisition economics.

Estimated Time 16 minutes
Difficulty Easy
Source Duke
20 / 100
During your weekly game of pickleball with the CEO of Puerto Pay, a Puerto Rican payments processor, she mentions that she’s thinking of expanding her company’s footprint and has been looking to acquire Telepay, a competitor based in Panama. She knows of your stellar reputation as a consultant and asks for you to determine whether or not she should acquire Telepay.

Clarifying Information

Industry information:

  • Telepay and Puerto Pay are both Payment Processing companies. Payments processors are technology companies that facilitate transactions between customers, merchants, and banks and collect fees for facilitating these transactions

Puerto Pay information:

  • GOAL: Puerto Pay had profits of $625MM in 2020 and is looking to increase profit in 2021 post-acquisition to $645MM, including the cost of buying Telepay
  • The CEO of Puerto Pay does not want to spend more than $500MM on acquiring Telepay

Telepay information:

  • Telepay has over 85% of market share in Panama so you can consider them to have a monopoly on the payments processing space in Panama (that is, Telepay generates 100% of the revenues of the Payment Processing market in Panama.)
  • Puerto Pay and Telepay have no overlapping customers.

Product information:

  • Both Puerto Pay and Telepay have the same product: Point-of-Sale (POS) systems. POS systems allow merchants to charge customers for transactions made in-store (think of the Square/Clover/Toast machines when you buy coffee)
Mock Interview
Interviewer

During your weekly game of pickleball with the CEO of Puerto Pay, a Puerto Rican payments processor, she mentions that she's thinking of expanding her company's footprint and has been looking to acquire Telepay, a competitor based in Panama. She knows of your stellar reputation as a consultant and asks for you to determine whether or not she should acquire Telepay.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

Puerto Pay is considering acquiring Telepay, a Panamanian payments processor with 85%+ market share, for no more than $500MM. The case requires analyzing whether the acquisition makes financial sense given Puerto Pay’s profit targets of $645MM post-acquisition, identifying cost savings opportunities, and assessing strategic risks.

Key Insights:

  1. Use Exhibit #1 to calculate Telepay’s revenues: 33% (Panama’s share of Central American market) × 90% (Telepay’s market share) × $681MM (total market) = ~$202MM in revenue
  2. Identify $25MM in IT cost synergies by recognizing Telepay has 20 excess server racks (68 actual vs 48 needed for 24,000 terabytes of data)
  3. Evaluate acquisition at $480MM ($400MM net debt × 120% control premium) against profit uplift and regulatory risks of acquiring a near-monopoly
  4. Structure analysis around Internal (deal financing, synergies, integration risks) vs External (market growth, competition, regulations) considerations