Exit Strategies in Today’s ATM Industry Climate

Featured in ATM Marketplace

The independent ATM industry landscape is changing. While new entrepreneurs continue to get into the business, consolidation is happening at a rapid pace.

In the last 10 years the number of registered Independent ATM Deployers (IADs) as reported by Visa and MasterCard have diminished from 418 to 186. And industry experts anticipate this trend will continue. 

The financial burden of increasing regulations and the required upgrades necessary to comply, has contributed to consolidation. Additionally, consolidation has come from smaller deployers that are ready to exit the space and larger organizations willing to purchase to gain market share. 

But why are IADs leaving? What do ATM business owners need to know about closing-up shop and how to make the most of their exit?

We discussed this topic with Paramount Management Group’s Senior Vice President of Sales and Marketing, Maya Fuentes, and Tony Braglio, president of Maryland-based independent ATM deployer B&B Financial Services, who sold his business to Paramount in 2021.

What are some of the economic forces that are negatively impacting ATM deployers?

Maya Fuentes: The short answer is rising costs. Specifically, ATM deployers are citing interest rate increases on the cost of cash and increasing fees from armored carriers and banks. Another factor is the cost of ATM hardware and upgrades. Not only does the cost of ATMs go up every year, regulatory mandates, like the upcoming TR-31 deadline require IADs to upgrade their software or hardware, or replace their machines, is taking a toll on profit margins.

Transaction volume is also an issue. It’s no secret the US ATM market is saturated. The war on cash continues and especially after COVID we are seeing many establishments go to cashless payment options. Paramount is actively involved in working to stem the tide through legislative efforts to keep cash relevant in the United States. 

What role do bank branch closures play in this?

Maya Fuentes: The increasing number of banks and credit unions eliminating underperforming branches is actually a benefit to IADs who offer ATM outsourcing. We still believe ATMs are the single best cash distribution network in the world. When a branch closes, the IAD has an opportunity to continue to service those financial institution clients through branding of existing terminals in the IAD’s fleet.

What role do changing consumer payments’ preferences play in this, if at all?

Maya Fuentes: As cashless transactions grow in consumer adoption and become easier to access, the more negatively it affects ATM withdrawals. For example, consumers can pay with a phone or even a smart watch in just seconds. The IAD industry needs to find a way to make up for the lack of transactions, however, high inflation and a looming recession may benefit ATM deployers. Historically in an economic downturn, we see an increase in consumers turn to cash to stay on budget and make ends meet. The US has a significant population of unbanked and underbanked population that rely almost exclusively on cash.

What would you say are the top three exit strategies for ATM deployers?

Maya Fuentes: We see a variety of options for today’s seller.  The most popular would be a straight sale with upfront cash and a standard holdback, or a participative model like the one Paramount offers. In the participative model the ATM deployer is relieved of the financial burdens and headaches of operating the business, while alleviating risk by taking some money off the table and continuing to participate in the revenue stream for maintaining and growing the business.  

What made you decide to partner with Paramount?

Tony Braglio: I’m a race car guy at heart. Partnering with Paramount has given me the horsepower to close bigger deals and focus on what I do best – sales, business development and enhancing the relationships I have with my clients plus forging new relationships. With technology changing so fast it made sense for me to partner with a bigger company rather than keep dumping money back into the business to keep it growing. Now with Paramount’s capital and manpower backing me up, I never have to say no to a deal. I don’t have to worry about finding the money to buy equipment, pay for expensive upgrades mandated by changing regulations or the rising cost of armored or cash. Paramount simply makes it happen.

The best part for me personally is that my capital isn’t tied up and I’m making as much if not more money now.

What tips would you give to others to make their exit strategy smooth?

Tony Braglio: Organization. If you are really thinking about going down this path, you need to get your books straight. And get all your paperwork and contracts in line, especially the expenses and the cost of cash if you load cash yourself.

Understanding what your true expenses are is the biggest obstacle you’ll encounter. If you are unorganized, it will take longer for someone to evaluate what your business is really worth.

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