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VeriFone: Seeing Opportunities That Others Miss

May 14, 2015

In 2000, GTCR’s networking activity within financial technology led to a relationship with Doug Bergeron. Mr. Bergeron had previously served as a senior executive of SunGard, a major financial services and technology business in the securities industry, and he was then serving as CEO of Geac Computer, a Canadian software and services company. Following Mr. Bergeron’s departure from Geac, GTCR and Mr. Bergeron looked for a solid company platform upon which to build a partnership, but couldn’t find the right opportunity.

A year later, VeriFone came into the picture. VeriFone had been a very successful company and the market leader in point-of-sale technology for processing credit card and other payment transactions. Hewlett-Packard (“HP”) purchased VeriFone, a public company, in 1997. While HP made significant investments in VeriFone’s product portfolio, HP focused less attention on the company’s sales and marketing capabilities and suffered substantial losses in pursuit of a “dot-com” strategy. Gores Technology Group (“Gores”) purchased VeriFone at a distressed price in mid-2001. Mr. Bergeron played a key role and assumed the role of VeriFone CEO.

GTCR began discussing a recapitalization with Mr. Bergeron shortly after he joined VeriFone. GTCR considered itself to be an attractive investor to Mr. Bergeron based on our existing relationship with him and our experience and credibility in the payments arena. Mr. Bergeron desired a partner that could add strategic value through knowledge and relationships. Based on our sector expertise, we believed VeriFone’s strong market position would enable it to rebound and drive substantial profitability. We also believed that cost cuts and spreading of fixed costs through organic growth could double margins over time. As well, through our research, we believed the cyclical need for better software functionality, greater processing capabilities and improved connectivity created the potential for substantial revenue growth.

In the spring of 2002, GTCR negotiated a recapitalization with Gores. After the acquisition, GTCR moved quickly with Mr. Bergeron to operationally transform the company. Mr. Bergeron eliminated substantial costs and made significant improvements in the company’s supply chain operations. Mr. Bergeron also introduced new products that achieved strong market reception. Concurrently, GTCR and Mr. Bergeron worked to improve the financial back office, providing for better information and allowing the company to pursue other capital market transactions. We believed this enhanced growth and higher-quality financial reporting made the company an attractive candidate for the public market.

VeriFone went public in May 2005.