Terminal velocity: The case for a Tyro takeover The last few years have not been great for Tyro shareholders, with $800 million being wiped off the market capitalisation of the company since October 2021, and shares sliding from $4.04 in October 2021 to $0.873 today.
You may not have heard of them, but you most certainly have used their service. Tyro Payments is a payment and business banking technology company that provides over 71,000 businesses with merchant services across Australia.
Tyro was founded in 2003 with the goal of making payments the easiest part of doing business. It has since evolved into a business that provides not only payment technology and infrastructure but also business banking products such as accounts and loans.
In 2015, Tyro raised $100 million from Tiger Global Management, TDM Asset Management, and Atlassian co-founder Mike Cannon-Brookes.
Four years later, in December 2019, Tyro was listed on the ASX with an initial market capitalisation of $1.37 billion. At the time, the company boasted it was partnering with 29,000 businesses, with $17.5 billion being processed in total transaction value and $52 million in loans originating through the platform.
However, the last few years have not been great for Tyro shareholders, with $800 million being wiped off the market capitalisation of the company since October 2021, and shares sliding from $4.04 in October 2021 to $0.873 today.
Financial Year Transaction Volume Loan Originations Gross Profit EBITDA Merchant Numbers 21 $25.5b $25.8m $119m $14.2m 58,000 22 $34.2b $99m $148m $10.7m 63,000 23 $42.6b $149m $193m $42.3m 68,000 24 $42.9b $136m $210m $55.7m 71,000 It is clear from the headline numbers that Tyro has all but stopped growing. It added 3000 merchants between FY23 and FY24, equating to 4% growth, and added $300 million of transaction volume between FY23 and FY24, representing a 0.8% growth rate.
While the company has been able to trim expenses, and increase gross profit and earnings before interest, taxes, depreciation and amortization (EBITDA), its loan originations are falling.
In my view, Tyro has hit terminal velocity (pardon the pun) as a standalone ASX-listed entity and the board should embark on a merger or sale process to unlock value for shareholders and unleash the full potential of Tyro.
I believe that there are four possible candidates that would be a great acquisition partner for Tyro and deliver value to shareholders and stakeholders. They are:
1. AMP
2. Airwallex
3. Judo Bank
4. Xero
AMP AMP has largely completed its own transformation. It has cut costs, increased EBIT and net profit after tax (NPAT), as well as launched new growth initiatives.
The AMP Bank division has grown its self-employed mortgage book as well as launched a new digital-first bank while reducing costs by 11.3%.
So it is not much of a stretch to add true business banking into the AMP Bank brand and an acquisition of Tyro could rapidly accelerate this.
AMP currently has a market cap of $3.51 billion and in FY24 produced an (underlying) NPAT of $236 million. It has over $1 billion in cash on its balance sheet and could easily raise the required capital to complete a transaction.
In my view, AMP could offer a 50% premium in a combination of cash and AMP shares, which could be an attractive option for Tyro shareholders.
SmartCompany Opinion
Finance
Terminal velocity: The case for a Tyro takeover The last few years have not been great for Tyro shareholders, with $800 million being wiped off the market capitalisation of the company since October 2021, and shares sliding from $4.04 in October 2021 to $0.873 today. James Frank James Frank February 20, 2025 Icon Share
tyro Source: SmartCompany You may not have heard of them, but you most certainly have used their service. Tyro Payments is a payment and business banking technology company that provides over 71,000 businesses with merchant services across Australia.
Tyro was founded in 2003 with the goal of making payments the easiest part of doing business. It has since evolved into a business that provides not only payment technology and infrastructure but also business banking products such as accounts and loans.
In 2015, Tyro raised $100 million from Tiger Global Management, TDM Asset Management, and Atlassian co-founder Mike Cannon-Brookes.
Four years later, in December 2019, Tyro was listed on the ASX with an initial market capitalisation of $1.37 billion. At the time, the company boasted it was partnering with 29,000 businesses, with $17.5 billion being processed in total transaction value and $52 million in loans originating through the platform.
However, the last few years have not been great for Tyro shareholders, with $800 million being wiped off the market capitalisation of the company since October 2021, and shares sliding from $4.04 in October 2021 to $0.873 today.
Financial Year Transaction Volume Loan Originations Gross Profit EBITDA Merchant Numbers 21 $25.5b $25.8m $119m $14.2m 58,000 22 $34.2b $99m $148m $10.7m 63,000 23 $42.6b $149m $193m $42.3m 68,000 24 $42.9b $136m $210m $55.7m 71,000 It is clear from the headline numbers that Tyro has all but stopped growing. It added 3000 merchants between FY23 and FY24, equating to 4% growth, and added $300 million of transaction volume between FY23 and FY24, representing a 0.8% growth rate.
While the company has been able to trim expenses, and increase gross profit and earnings before interest, taxes, depreciation and amortization (EBITDA), its loan originations are falling.
In my view, Tyro has hit terminal velocity (pardon the pun) as a standalone ASX-listed entity and the board should embark on a merger or sale process to unlock value for shareholders and unleash the full potential of Tyro.
I believe that there are four possible candidates that would be a great acquisition partner for Tyro and deliver value to shareholders and stakeholders. They are:
1. AMP
2. Airwallex
3. Judo Bank
4. Xero
AMP AMP has largely completed its own transformation. It has cut costs, increased EBIT and net profit after tax (NPAT), as well as launched new growth initiatives.
The AMP Bank division has grown its self-employed mortgage book as well as launched a new digital-first bank while reducing costs by 11.3%.
So it is not much of a stretch to add true business banking into the AMP Bank brand and an acquisition of Tyro could rapidly accelerate this.
AMP currently has a market cap of $3.51 billion and in FY24 produced an (underlying) NPAT of $236 million. It has over $1 billion in cash on its balance sheet and could easily raise the required capital to complete a transaction.
In my view, AMP could offer a 50% premium in a combination of cash and AMP shares, which could be an attractive option for Tyro shareholders.
The combined entity would have an NPAT of $261 million, a combined loan book (commercial and residential) of $23.2 billion, and 71,000 Tyro merchants that AMP could sell their banking and superannuation services to.
An acquisition of Tyro by AMP would be in line with the bank’s strategic initiatives, accelerate its banking growth, and place it as a true challenger SME bank. It would create a true end-to-end banking and financial services provider for Australian SMEs, their owners, and employees.
Airwallex Airwallex is a global payments and financial platform for growing businesses and, in my view, an interesting candidate to take Tyro private.
The fintech has been valued at $US5.6 billion, has around $350 million of annual recurring revenue, and processes over $80 billion in transaction volume.
While predominantly a digital payments platform, an acquisition of Tyro could expand Airwallex’s capability and offering to attract more traditional bricks-and-mortar retailers.
And given Airwallex is planning for an IPO, it may just be the type of transaction that is complimentary to a listing.
Details regarding Airwallex’s financials are scant, however, a combined entity could process more than $120 billion in transaction volume, generate revenue north of $500 million, and push out EBITDA of more than $100 million.
SmartCompany Opinion
Finance
Terminal velocity: The case for a Tyro takeover The last few years have not been great for Tyro shareholders, with $800 million being wiped off the market capitalisation of the company since October 2021, and shares sliding from $4.04 in October 2021 to $0.873 today. James Frank James Frank February 20, 2025 Icon Share
tyro Source: SmartCompany You may not have heard of them, but you most certainly have used their service. Tyro Payments is a payment and business banking technology company that provides over 71,000 businesses with merchant services across Australia.
Tyro was founded in 2003 with the goal of making payments the easiest part of doing business. It has since evolved into a business that provides not only payment technology and infrastructure but also business banking products such as accounts and loans.
In 2015, Tyro raised $100 million from Tiger Global Management, TDM Asset Management, and Atlassian co-founder Mike Cannon-Brookes.
Four years later, in December 2019, Tyro was listed on the ASX with an initial market capitalisation of $1.37 billion. At the time, the company boasted it was partnering with 29,000 businesses, with $17.5 billion being processed in total transaction value and $52 million in loans originating through the platform.
However, the last few years have not been great for Tyro shareholders, with $800 million being wiped off the market capitalisation of the company since October 2021, and shares sliding from $4.04 in October 2021 to $0.873 today.
Financial Year Transaction Volume Loan Originations Gross Profit EBITDA Merchant Numbers 21 $25.5b $25.8m $119m $14.2m 58,000 22 $34.2b $99m $148m $10.7m 63,000 23 $42.6b $149m $193m $42.3m 68,000 24 $42.9b $136m $210m $55.7m 71,000 It is clear from the headline numbers that Tyro has all but stopped growing. It added 3000 merchants between FY23 and FY24, equating to 4% growth, and added $300 million of transaction volume between FY23 and FY24, representing a 0.8% growth rate.
While the company has been able to trim expenses, and increase gross profit and earnings before interest, taxes, depreciation and amortization (EBITDA), its loan originations are falling.
In my view, Tyro has hit terminal velocity (pardon the pun) as a standalone ASX-listed entity and the board should embark on a merger or sale process to unlock value for shareholders and unleash the full potential of Tyro.
I believe that there are four possible candidates that would be a great acquisition partner for Tyro and deliver value to shareholders and stakeholders. They are:
1. AMP
2. Airwallex
3. Judo Bank
4. Xero
AMP AMP has largely completed its own transformation. It has cut costs, increased EBIT and net profit after tax (NPAT), as well as launched new growth initiatives.
The AMP Bank division has grown its self-employed mortgage book as well as launched a new digital-first bank while reducing costs by 11.3%.
So it is not much of a stretch to add true business banking into the AMP Bank brand and an acquisition of Tyro could rapidly accelerate this.
AMP currently has a market cap of $3.51 billion and in FY24 produced an (underlying) NPAT of $236 million. It has over $1 billion in cash on its balance sheet and could easily raise the required capital to complete a transaction.
In my view, AMP could offer a 50% premium in a combination of cash and AMP shares, which could be an attractive option for Tyro shareholders.
The combined entity would have an NPAT of $261 million, a combined loan book (commercial and residential) of $23.2 billion, and 71,000 Tyro merchants that AMP could sell their banking and superannuation services to.
An acquisition of Tyro by AMP would be in line with the bank’s strategic initiatives, accelerate its banking growth, and place it as a true challenger SME bank. It would create a true end-to-end banking and financial services provider for Australian SMEs, their owners, and employees.
Airwallex Airwallex is a global payments and financial platform for growing businesses and, in my view, an interesting candidate to take Tyro private.
The fintech has been valued at $US5.6 billion, has around $350 million of annual recurring revenue, and processes over $80 billion in transaction volume.
While predominantly a digital payments platform, an acquisition of Tyro could expand Airwallex’s capability and offering to attract more traditional bricks-and-mortar retailers.
And given Airwallex is planning for an IPO, it may just be the type of transaction that is complimentary to a listing.
Details regarding Airwallex’s financials are scant, however, a combined entity could process more than $120 billion in transaction volume, generate revenue north of $500 million, and push out EBITDA of more than $100 million.
Airwallex could sell Tyro’s platform to its global client base while also selling its platform directly to the 71,000 merchants Tyro currently has.
Given that Mike Cannon-Brookes is an investor in both entities, this may present a way for the merger to occur.
In any event, the combining of the platforms and technology could be transformative for SMEs globally.
Judo Bank Judo Bank should be an obvious acquirer for Tyro. It is the clear challenger SME bank in Australia, providing an ever-increasing range of credit and deposit products to businesses.
SmartCompany Opinion
Finance
Terminal velocity: The case for a Tyro takeover The last few years have not been great for Tyro shareholders, with $800 million being wiped off the market capitalisation of the company since October 2021, and shares sliding from $4.04 in October 2021 to $0.873 today. James Frank James Frank February 20, 2025 Icon Share
tyro Source: SmartCompany You may not have heard of them, but you most certainly have used their service. Tyro Payments is a payment and business banking technology company that provides over 71,000 businesses with merchant services across Australia.
Tyro was founded in 2003 with the goal of making payments the easiest part of doing business. It has since evolved into a business that provides not only payment technology and infrastructure but also business banking products such as accounts and loans.
In 2015, Tyro raised $100 million from Tiger Global Management, TDM Asset Management, and Atlassian co-founder Mike Cannon-Brookes.
Four years later, in December 2019, Tyro was listed on the ASX with an initial market capitalisation of $1.37 billion. At the time, the company boasted it was partnering with 29,000 businesses, with $17.5 billion being processed in total transaction value and $52 million in loans originating through the platform.
However, the last few years have not been great for Tyro shareholders, with $800 million being wiped off the market capitalisation of the company since October 2021, and shares sliding from $4.04 in October 2021 to $0.873 today.
Financial Year Transaction Volume Loan Originations Gross Profit EBITDA Merchant Numbers 21 $25.5b $25.8m $119m $14.2m 58,000 22 $34.2b $99m $148m $10.7m 63,000 23 $42.6b $149m $193m $42.3m 68,000 24 $42.9b $136m $210m $55.7m 71,000 It is clear from the headline numbers that Tyro has all but stopped growing. It added 3000 merchants between FY23 and FY24, equating to 4% growth, and added $300 million of transaction volume between FY23 and FY24, representing a 0.8% growth rate.
While the company has been able to trim expenses, and increase gross profit and earnings before interest, taxes, depreciation and amortization (EBITDA), its loan originations are falling.
In my view, Tyro has hit terminal velocity (pardon the pun) as a standalone ASX-listed entity and the board should embark on a merger or sale process to unlock value for shareholders and unleash the full potential of Tyro.
I believe that there are four possible candidates that would be a great acquisition partner for Tyro and deliver value to shareholders and stakeholders. They are:
1. AMP
2. Airwallex
3. Judo Bank
4. Xero
AMP AMP has largely completed its own transformation. It has cut costs, increased EBIT and net profit after tax (NPAT), as well as launched new growth initiatives.
The AMP Bank division has grown its self-employed mortgage book as well as launched a new digital-first bank while reducing costs by 11.3%.
So it is not much of a stretch to add true business banking into the AMP Bank brand and an acquisition of Tyro could rapidly accelerate this.
AMP currently has a market cap of $3.51 billion and in FY24 produced an (underlying) NPAT of $236 million. It has over $1 billion in cash on its balance sheet and could easily raise the required capital to complete a transaction.
In my view, AMP could offer a 50% premium in a combination of cash and AMP shares, which could be an attractive option for Tyro shareholders.
The combined entity would have an NPAT of $261 million, a combined loan book (commercial and residential) of $23.2 billion, and 71,000 Tyro merchants that AMP could sell their banking and superannuation services to.
An acquisition of Tyro by AMP would be in line with the bank’s strategic initiatives, accelerate its banking growth, and place it as a true challenger SME bank. It would create a true end-to-end banking and financial services provider for Australian SMEs, their owners, and employees.
Airwallex Airwallex is a global payments and financial platform for growing businesses and, in my view, an interesting candidate to take Tyro private.
The fintech has been valued at $US5.6 billion, has around $350 million of annual recurring revenue, and processes over $80 billion in transaction volume.
While predominantly a digital payments platform, an acquisition of Tyro could expand Airwallex’s capability and offering to attract more traditional bricks-and-mortar retailers.
And given Airwallex is planning for an IPO, it may just be the type of transaction that is complimentary to a listing.
Details regarding Airwallex’s financials are scant, however, a combined entity could process more than $120 billion in transaction volume, generate revenue north of $500 million, and push out EBITDA of more than $100 million.
Airwallex could sell Tyro’s platform to its global client base while also selling its platform directly to the 71,000 merchants Tyro currently has.
Given that Mike Cannon-Brookes is an investor in both entities, this may present a way for the merger to occur.
In any event, the combining of the platforms and technology could be transformative for SMEs globally.
Judo Bank Judo Bank should be an obvious acquirer for Tyro. It is the clear challenger SME bank in Australia, providing an ever-increasing range of credit and deposit products to businesses.
Judo Bank’s regional SME plan contributes to $2.3 billion in new loans Judo Bank’s regional SME plan contributes to $2.3 billion in new loans With a loan book of more than $10 billion, income of $200 million for the first half of FY25 (generating $40 million NPAT), and $400 million for the FY25 forecast (which will generate $100 million NPAT), Judo is perfectly placed to consider a merger with Tyro.
Judo currently has a market capitalisation of $2.36 billion, with cash in the bank of approximately $780 million.
An acquisition or merger could create a banking entity that has payment solutions right through to credit and deposit facilities. Naturally, Judo could leverage the 71,000 merchants and accelerate the lending capacity through the Tyro platform.
Given its market capitalisation, a cash-plus-scrip offer would make sense and potentially give Tyro shareholders some long-term upside.
In my view, Judo should seriously consider this acquisition as an acceleration into the payments space, with the next natural move to then launch its own transactional banking platform. It would be in line with Judo’s strategic plan and would cement its position as the emerging SME bank in Australia.
Xero Xero is the big hairy tech giant that spits cash and, in my view, could be a real contender to lob a bid at Tyro.
Xero currently has a market cap of $28 billion and has for the first half of FY25 produced $312 million of EBITDA at 43% on a rule of 40 score. This machine has undergone a refocus, growing subscribers and increasing average revenue per user to over $43.
The strategy to focus on US and UK expansion appears to be working with further market penetration and growing subscriber revenue. The outcome of this is that Xero is in a powerful position with plenty of cash on its balance sheet, a significant total addressable market (TAM) still to conquer, and a machine that is spitting cash daily while still growing at some rate of knots!
The acquisition of Tyro would fit within Xero’s strategic plan by accelerating its movement into payments and it could be seen as investing in an area that would help Xero continue to win into the future.
Xero could benefit from leveraging Tyro’s payment infrastructure into its user base, and Tyro could benefit from joining a tech giant that is growing fast and has a huge user base of possible merchants.
The deal could be entirely cash, however, I think a cash and scrip combination would be super attractive to Tyro’s shareholders.
Conclusion In my view, Tyro has hit terminal velocity as a standalone listed entity.
Its board knocked back a takeover offer from Potentia in 2022 at $1.6 per share, stating at the time that “the revised indicative proposal continues to significantly undervalue Tyro and, as such, is not in the best interests of shareholders as a whole”.
Fast forward to February 2025, and Tyro’s share price is half the takeover offer, growth has all but stopped and the business is languishing on the ASX. Tyro needs a new home where its technology can be unleashed, and the obvious symbiotic value-adding relationships can be extracted.
Given its current market cap is 8.4 x FY24 EBITDA, a takeover bid in the realm of $600 million would represent a healthy but not ridiculous valuation.
TYR Price at posting:
86.5¢ Sentiment: Buy Disclosure: Held
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