Banc of California acquired the payments platform and technology of Global Payroll Gateway and its wholly-owned subsidiary, Deepstack Technologies, for $24 million in cash and stock. Headquartered in Jupiter, FL with a team located in Southern California, Deepstack is a differentiated software-led and e-commerce payments platform that provides clients with payment solutions, including merchant processing, payments acceptance and disbursements and tokenization.

Key Strategic and Financial Benefits

• Enables Banc of California to offer a one-stop-shop payments solution and significantly expands the bank’s addressable market
• Adds a high margin source of stable, predictable fee income, with the end-to-end solution enabling Banc of California to capture a much larger share of the revenue per transaction than the typical merchant processing of regional banks
• Diversifies the company’s revenue mix while increasing non-interest income as a percentage of revenue
• Provides another source of non-interest-bearing deposits
• Further differentiates Banc of California from regional bank competitors, enhances business development capabilities in attractive vertical markets and provides opportunities for expanding relationships with existing clients
• Creates another driver of profitable long-term growth and franchise value

The acquisition provides the bank with a proprietary technology platform for payment processing, offering the full stack of payment services to its clients as a payment gateway, payment provider and an ISO 8583 payment switch. Through its Deepstack subsidiary, the bank will market payment processing services to a range of business clients, including existing clients, integrated software vendors, e-commerce marketplaces, fintechs and other merchants who are seeking a convenient and tech-oriented solution to embed payments into their software and websites.

“The acquisition of Deepstack expands our business into payment processing and furthers our strategy to grow fee-based income in a scalable and meaningful way,” Jared Wolff, president and CEO at Banc of California, said. “Deepstack’s client-centric technology platform will enable us to offer existing and new clients a best-in-class transaction processing solution. Combined with our existing, leading-edge deposit and treasury management solutions and tailored lending services, we continue to execute on our strategy to be the hub of the financial services ecosystem for our clients and enhance the value of our franchise.”

“We are excited to join Banc of California and provide a full stack payment solution to clients that very few banks and payment processors are able to offer. ISVs and tech-enabled businesses are tired of piecemeal embedded payments and finance solutions and limited interactions with the underlying bank,” Jayme Amirie, president of Deepstack, said. “By combining with Banc of California, we can offer clients cutting-edge payments technology solutions to enable them to seamlessly integrate and monetize their platforms while giving clients faster access to funds from credit card receivables, same-day account visibility and better reporting and account reconciliation.”

Transaction Details

Under the terms of the transaction, the bank acquired the assets of Deepstack, including but not limited to the intellectual property and certain clients of Deepstack. The consideration was paid 70% in cash and 30% in the company’s common stock using the 20 trading-day volume weighted average closing price of $17.46 per share. All of Deepstack’s employees have joined the bank and its three executives have entered into three-year employment agreements with the bank. Eight of the 11 employees are based in Southern California. Deepstack Technologies will operate as an operating subsidiary of the bank and Jayme Amirie will continue as the president of Deepstack.

The transaction is expected to be neutral to consensus earnings per share estimates in 2023 and expected to be accretive thereafter. The transaction is expected to be approximately 2.7% dilutive to tangible book value per share. The transaction includes a three-year earn-out beginning in 2023 to be paid from operating profits of the new subsidiary.

MJC Partners served as financial advisor to Banc of California on the transaction, and Paul Hastings served as legal counsel to Banc of California. MAPP Advisors acted as advisor to Deepstack and Global Legal served as legal counsel to Deepstack.