American Express Co.’s Lisa Marchese is seeing more interest from target companies in being acquired, but an attractive price won’t be enough to get the financial giant to the finish line.
With venture capital firms more cautious and depressed public stock prices weighing on valuations, American Express
is getting more inquiries from businesses that need capital or want to align with the Amex brand, said Marchese, who is head of corporate development for the company.
“We’re starting to see more inbound discussions,” Marchese told MarketWatch. “Our view is just because it’s cheap doesn’t mean you should do it.”
As a handler of both M&A deals and venture investments for American Express, Marchese expects to ink two to five acquisitions in 2022 and 2023. To get to that number, Amex will typically spend about two weeks each to weight about 50 potential deals per year.
Amex’s M&A deals may range from $20 million up to $1 billion, with a sweet spot in the neighborhood of $200 million, although the terms are often undisclosed.
At the same time, American Express Ventures, the company’s venture investing arm, talks to 1,500 companies a year and makes seven to 10 investments typically, out of a total range of seven to 12 a year.
Despite signs of a potential recession, Amex remains keen to find small acquisitions that will bring new technological capabilities and bolt-ons businesses that could benefit from the company’s large distribution with card holders and other customers.
“The market is in a very different place than most of us have seen for years,” Marchese said. “We’re committed to making sure that we bring innovation in, regardless of whether it’s through acquisitions or investment. We still have a pretty clear appetite [for]…more.”
While M&A often requires late-night phone calls and long hours, the real challenge is bringing a different culture and talent group into the organization, she said.
Things like HR systems, back office functions and general ledger systems remain easier to handle than the more challenging tasks: putting the new technologies onto Amex’s product road map; also bringing in talent and retaining them, typically for two years after a deal closes.
“If you don’t have the same vision…it’s hard to make valuation creation work,” Marchese said. “We spend a ton of time on that in our pre-sign and pre-close stages and then in the 18 to 24 months after close.”
Diversity at Amex as well as with target companies remains a priority.
“The industry has been dominated by a very homogenous group,” Marchese said. “It’s super important that we’re focused on [diversity] boh externally and internally.”
Marchese’s deals with American Express include its 2020 acquisition of business financing provider Kabbage for an undisclosed price, as well as 2019’s acquisition of Resy, a high-end restaurant reservation provider.
She worked on Amex’s 2019 acquisition of AcomPay Solutions Inc., the business-to-business digital payment automation platform.
In 2018, American Express acquired personal travel assistant Mezi, a messaging AI app for flights, hotels and restaurant reservations, for an undisclosed sum. The deal took place two years after American Express Ventures made an undisclosed investment in Mezi.
In 2019, American Express paid an undisclosed sum for Pocket Concierge, a Japanese restaurant booking service, in a bid to widen its service offerings to card members.
It quietly acquired U.K. payments startup Cake Technologies in 2017 for a reported $13 million. Amex bought Cake to provide card members with better service in the dining space.