Last week, Harlow Payments appointed Ray Sidhom as executive chairman. If the name sounds familiar, it's because Sidhom is the founder of Evo Payments, which was sold to Global Payments for $4 billion in 2022. Now, he has teamed up with former Evo colleague Diego Vazquez, Harlow's current CEO, and his son Chris Sidhom, the company's president, to accelerate the pace of acquisitions.

This is a common strategy in the payments space. Large card processors such as Global Payments and Fiserv expand by acquiring independent sales organizations (ISOs) to sell services to more merchants, and these ISOs themselves are attracting more agents to sell processing services.

In 2016, Atlanta-based Global Payments completed its acquisition of Heartland Payments Systems for $4.3 billion, a very similar deal. Now, former Heartland executive and PayCompass CEO Justin Volrath is growing his ISO business. Volrath says this is an ongoing pattern in the industry, and he expects the wave won't subside anytime soon.

In fact, larger players in the industry are also acquiring more companies this year. "We're on the brink of more of these deals," Volrath said on the sidelines of the Midwest Acquirers Association meeting in Chicago last week. "You'll see people sell a company, then wait out the contractual period, or work for the new entity, and then start their own venture. This happens over and over."

At Harlow, the elder Sidhom played a key role in the company's first significant deals this year, including the acquisition of PayFactory. His son said in an interview earlier this month that he sees opportunities to avoid the "friction" sometimes encountered in Evo acquisitions and to invest in other companies without needing full ownership.

"We're trying to correct those mistakes from the start, building a complete financial ecosystem that allows us to upsell multiple products to merchants, and it's entirely agent-driven," the younger Sidhom said. The strategy includes acquiring a 51% to 70% stake in a company, whether it's an ISO or a POS provider in a specific vertical, and retaining the acquired company's leaders, with Harlow providing capital and industry expertise.

"Unless a company is portable, I don't lean toward full integration or 100% acquisition," the younger Sidhom added. "Even then, I want people who are willing to stay and take the company to the next level, while leveraging our platform for support."

Payroc WorldAccess, based in Tinley Park, Illinois, is another payment processing company gobbling up independent sales organizations. Last year, it acquired cloud-based peer LedgerPay and payment orchestration company BlueSnap.

Volrath, who co-founded PayCompass with his wife Nini, cited several reasons consolidation continues, such as larger entities absorbing smaller ones and adding value, like enhancing technology. He noted that scale matters in the industry: "There's strength in numbers." He explained this is especially true as ISOs, independent sales agents, POS vendors, and other small payment intermediaries face more complex regulations, including new rules from card networks Visa and Mastercard.

"As regulation increases, the need for consolidation becomes greater because smaller players will struggle to comply with some of these rules, not just regulations but also changes in large card brand compliance requirements," Volrath said.

Consolidation is also driven by continued growth in industry demand, creating market share opportunities for new businesses, such as PayCompass, founded in 2020. Industry competition isn't the traditional head-to-head. With partnerships forming, market strategies shifting, and acquisitions unfolding, there's a "mix of competitors." For example, Block's Square was once a formidable rival, but as it becomes more willing to work with partners, Volrath is happy to embrace the company.

"There's enough business that even if they're my competitor today, they could be my partner or even a colleague tomorrow. You never know," Volrath said.

Driving PayCompass's growth is the industry shift toward more integrated solutions, and Volrath saw evidence of this evolution at the conference. He said more people approached his booth interested in integrating software into payment systems. "A lot of people here are talking about integrated payments," Volrath said. "People came up wanting to discuss software integration, deepening the relationship between payments and software. We haven't seen this level before."