What Is an Acquirer?

An acquirer is a company that obtains the rights to another company or business relationship through a deal. These deals are usually mergers or acquisitions, but can also be other structured agreements. Acquirers buy out a company and take over their ownership typically through a purchase of a large portion of the target company's stock.

Commonly, acquirers are also financial institutions that acquire the rights to a merchant account that allows them to service and manage the merchant’s bank account related to customer electronic payments.

Key Takeaways

  • An acquirer can refer to either a corporate acquirer or a merchant acquirer.
  • A corporate acquirer is a company that obtains the rights to another company or business relationship through a deal.
  • A merchant acquirer is a merchant bank utilized by a merchant to process electronic payments for their customers.
  • Corporate acquirers purchase other companies because they believe some benefit is to be achieved. They do this through either a cash purchase, share purchase, or exchange of shares.
  • Merchant acquirers facilitate electronic payments through their merchant network and manage the communications, settlements, and deposits of the merchant's account.

Understanding an Acquirer

There are plenty of reasons as to why a company would be interested in acquiring another company. These reasons can include a reduction in competition, the creation of synergies, and access to a new market.

Acquirer relationships can vary by the type of deal in place. Corporations can acquire another company through a deal process that allows them to pay an agreed-upon price for the rights to take ownership of another company and integrate it with their current business operations. This can take the form of a cash purchase, purchase of stock, exchange of stock, or a combination of all.

An acquisition is usually agreed upon by both companies but sometimes can be one-sided. In this instance, an acquisition is a hostile takeover and the target company usually implements procedures to avoid being acquired, such as the use of a poison pill.

In the payments industry, an acquirer may also be a financial institution that partners with a merchant to complete electronic payment transactions and deposit processes.

For example, a retail store that sells clothing would like to set up an electronic payment system that allows its customer to pay electronically by credit card or their phone. The retailer would enlist the services of a merchant acquirer, also known as a merchant bank, that would take control of the merchant's account and accept deposits into the account from customer payments.

Types of Acquirers

Corporate Acquirer

In a corporate acquisition, the acquirer is the company purchasing another company for a specified price. Corporate acquisitions are usually agreed upon by two parties. They allow an acquiring company to fully take over a business and integrate it into their current business.

In an acquisition, the acquiring company believes that they gain profit from buying out another company and absorbing its beneficial components while discontinuing its unproductive ones. In this manner, it also believes it is improving the company it is buying.

In acquisitions involving public companies, the acquirer will usually see a short term stock price drop when acquiring a company. The drop is usually due to the uncertainty of the transaction and the premium that the acquirer pays for the purchase.

Merchant Acquirer

In a merchant acquirer agreement, the acquirer serves as a third-party partner to a merchant. Merchants must partner with a financial institution to process electronic transactions and receive electronic payments.

A merchant acquirer is generally a bank service provider that manages electronic deposits of funds from clients paid to a merchant account. A merchant acquirer can also be known as a settlement bank as they facilitate the communication and settlement of merchant payments.

Every time a debit or credit card is used to make a payment, the merchant acquirer must be contacted for processing and settlement. A merchant acquirer may dictate the types of payments it will allow for processing.

Generally, acquirers have processing relationships with a network of providers, usually including major processors such as Visa, Mastercard, and American Express. Some merchant acquirers may only have network rights with a single branded card processor, which may limit the types of branded cards the merchant can accept.

An acquirer will charge a merchant varying fees which are detailed in their agreement. Most acquirers charge a per-transaction fee as well as a monthly fee. The acquirer’s per-transaction fees cover the costs associated with network processing. Monthly fees may also be charged to cover various other servicing aspects of the account.