Operating partners spend most of their time hunting for the next 100 to 300 basis points of EBITDA improvement across the portfolio. They look at procurement, headcount, pricing strategy, working capital, and SG&A. What they almost never look at, even though it sits on every P&L they own, is merchant services and bank fees.

It is one of the cleanest, most scalable, and most overlooked EBITDA adds available to a private equity operator. The savings are real cash, they require no new vendors, and they hold long after the engagement closes.

Why Merchant Fees Escape Diligence

Processing costs are buried in statements built to be hard to read. The margin a processor takes is spread across interchange pass-through, assessments, and a markup layer that looks like a cost of doing business. Finance teams reconcile the total and move on, because nothing on the statement flags what is negotiable and what is not.

At the portfolio level that opacity compounds. Each company has its own processor relationships, its own contract vintage, and its own buried markups, and no single operator has the benchmark data to know whether any of it is fair.

The Math at Portfolio Scale

Reclaimed processing fees flow almost entirely to the bottom line. There is no cost of goods, no headcount, and no capital expense attached. A dollar reclaimed is close to a dollar of EBITDA, and at a typical multiple that dollar is worth several times its face value at exit.

A dollar of reclaimed processing fees is close to a dollar of EBITDA, with no cost of goods and no capital attached.

Run that across ten or twenty portfolio companies and the program stops being a line item. It becomes a repeatable value-creation lever you can apply to every new acquisition.

Running the Playbook

  1. Audit during diligence. Fold a merchant services review into the diligence checklist. It surfaces a quantified savings opportunity before close, with no disruption to the target.
  2. Restructure post-close. Restructure pricing with the existing processors. No switching, no new hardware, no point-of-sale changes.
  3. Monitor continuously. Fees drift back up over time. Ongoing monitoring keeps the savings in place across the hold period.
  4. Repeat at the platform level. Standardize the review so every add-on and every new platform runs through the same process.

Why It Holds

Because the engagement keeps every existing relationship in place, there is nothing for the portfolio company to unwind and no operational risk to manage. The savings show up on the statements they already receive, from the processors they already use. The work is contingency-based, so the program carries no cost until it produces.