Strategic moves: Exploring recent mergers and acquisition activities in the gift card industry

Print

Email

Despite the macroeconomic environment, affecting businesses across industry verticals, the gift card industry remained resilient throughout 2022. In H1 2022, gift card demand was driven by consumers pulling away from the effects of the pandemic. In H2 2022, the demand was driven by the soaring cost of living and inflation. In H1 2023, inflationary pressure has continued to drive the uptake of gift cards among consumers worldwide. Not just consumers, but the uptake has grown significantly in the business-to-business category as well.

Going forward, the demand for gift cards is expected to remain robust in the global market, due to the seismic shift in consumer behavior. To tap into the potentially high-growth market over the next five years, providers are seeking to expand their geographical presence through mergers and acquisition deals.

• Card Factory, for instance, announced that the firm had acquired South Africa-based SA Greetings Corporation in April 2023. The United Kingdom-based gift card retailer had acquired SA Greetings Corporation for a total of £2.5 million and comes at a time when the firm is seeking to expand its international presence.

SA Greetings Corporation has a strong presence in the South African market. With 24 Cardies retail outlets and another four operated by franchises, the firm generated EBITDA of £591,000 during the 12-month period leading to 28 February 2023. From the net sales of £9.4 million, the firm recorded a pre-tax profit of £165,000 during the same period.

The acquisition of SA Greetings will support the strategic growth objectives of Card Factory. Notably, Card Factory will gain access to key wholesale accounts through SA Greeting’s printing, merchandising, and warehousing capacity. In addition to positioning itself as a key player in the South African gift card industry, the purchase will also enable Card Factory to replicate the printing, merchandising, and warehousing capabilities of SA Greetings in other global target markets.

In another acquisition deal, North American gift card issuer TOTUS announced the purchase of Powerhouse Brands’ gift card consultancy business in May 2023. The transaction will enable TOTUS to expand its gift card program to multiple Fortune 500 brands.

Alongside mergers and acquisition deals, strategic collaborations are also growing in the global gift card market. With retail-focused gift cards growing in demand, providers are forging strategic alliances to further boost their network.

• One4all Gift Cards, for instance, announced that the firm had entered into a strategic collaboration with ASOS and Secret Sales in May 2023. One4all Gift Card, which is a multi-retailer gift card, is redeemable online and offline at over 170 brands in the United Kingdom. The partnership with ASOS and Secret Sales further expands the presence of multi-retailer gift card provider in the fashion e-commerce segment. In the space, One4all Gift Cards has already forged alliances with the likes of Calvin Klein, H&M, and New Look.
• Factor4, another gift card provider, also announced a strategic collaboration with Golfpay360 in May 2023. Golfpay360's collaboration empowers golf course operators with comprehensive gift card and loyalty solutions across multiple channels. Golfpay360 clients can also sell physical and digital gift cards through their online platform, as per the terms of the deal.

The competitive landscape is growing at a rapid rate in the global gift card market. With firms seeking expansion and higher market share in the fast-growing space, PayNXT360 expects more such mergers and acquisitions and strategic partnership deals in the segment going forward in H2 2023.

The trend of mergers and acquisition picked up pace in H2 2023 and continued further in Q1 2023 on the back of macroeconomic factors, affecting the ability of startups to raise funding rounds.

• The United States-based gift card provider Wolfe, for instance, announced the purchase of Give InKind, another firm based in the North American market. Give InKind entered into the acquisition deal to extend its runway. In 2022, the firm announced layoffs and slashed its marketing spending to avoid business closure due to lack of funding.

Other factors such as strengthening the position in the segment is also driving the trend of merger and acquisitions. Pine Labs, one of the leading players in the gift card segment, closed another acquisition deal after purchasing Saluto Wellness in Q1 2023. Thea acquisition is part of the firm’s strategy to bolster its gift card service in the business-to-business segment. In 2022, Pine Labs also completed with the merger with digital gift card platform Qwikcilver, which it announced to acquire for US$110 million in March 2019.   

The merger and acquisition trend will be accelerated by the ongoing funding winter, as firms are struggling to raise venture capital and private equity funding worldwide. This means that valuations have declined substantially compared to the last two years. As a result, the current macroeconomic environment is presenting good buyout opportunities at a reasonable valuation for well-funded firms in the segment, enabling them to expand their geographical presence.

To know more and gain a deeper understanding of the global gift card market, click here.