The Hidden EBITDA Add for PE Operators: Auditing Merchant Services Across the Portfolio
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 optimization. What they almost never look at, even though it is sitting on every P&L in the portfolio, is merchant services and bank fees.
It is one of the cleanest EBITDA adds available to a PE operator. It is recurring, it scales across multiple portfolio companies with the same playbook, it requires no operational restructuring, and it can be executed on a pure contingency basis with zero capital outlay. And yet, in our experience, it is one of the most consistently overlooked levers in the entire value-creation toolkit.
Here is why it works, and how the best PE operators are using it.
Why Merchant Services Is a Portfolio-Wide Opportunity
Three things are true of nearly every PE-backed business that processes credit cards or holds depository accounts at scale.
The fees are recurring. Unlike one-time procurement wins, merchant services and bank fees are paid every single month. Recovered savings flow to EBITDA in perpetuity, not as a one-time event.
The fees are universal. Every business that accepts cards pays interchange, assessments, and processor markup. Every business that holds bank accounts pays treasury fees, lockbox charges, and account analysis. The methodology that audits one portfolio company applies almost identically to the next. This is what makes it scalable.
The fees are almost always overpaid. Most middle-market businesses overpay by 15 to 40 percent on processing and treasury fees. They overpay because the statements are intentionally complex, the benchmarks are not publicly available, and no internal finance team has the time or comparison data to audit them properly. PE operators inherit that overpayment when they acquire the business and almost never address it because it is not on the standard 100-day plan.
How to Run the Playbook Across a Portfolio
The playbook is simple, repeatable, and works at every stage of the hold period.
Step 1: Diligence Phase During acquisition diligence, run a merchant services and bank fee audit on the target. The analysis takes ninety days of statements and returns a written savings estimate within five business days. The recovered savings can be modeled into the LBO case as a Day 1 EBITDA improvement, which directly impacts the entry multiple and the deal economics. We have seen audits surface six- and seven-figure annual savings on businesses that no one in the deal team had thought to look at.
Step 2: Post-Close, First 100 Days After close, execute the recovery on the existing processor and bank relationships. No vendor switching. No operational disruption. The savings show up on the next statement and flow directly to EBITDA. The recovery work happens in parallel with the operational integration plan, so it does not compete for management attention.
Step 3: Portfolio-Wide Rollout Once the playbook proves out on one portfolio company, run it across the rest of the portfolio. The same audit methodology applies. The same contingency model applies. The same EBITDA impact applies. For a typical mid-market PE firm with 8 to 15 portfolio companies, the cumulative savings often run into seven or eight figures annually.
Step 4: Ongoing Monitoring Lock in the savings with portfolio-wide monitoring so that fee creep does not erode the gains over the hold period. This is critical. Without monitoring, processors and banks quietly raise rates over time and the EBITDA improvement reverses by year three of the hold.
The Numbers in Practice
Consider a mid-market PE firm with twelve portfolio companies. Average annual processing volume per company: $40 million. Average annual processing fees: $1.1 million per company.
If the audit recovers 25 to 40 basis points on average across the portfolio (which is conservative based on our engagement data), the annual savings work out to:
Per company: $100,000 to $160,000
Across the portfolio: $1.2 million to $1.9 million annually
At a 10x EBITDA multiple, that translates to $12 million to $19 million in enterprise value created. Net of contingency fees, the recovery still translates to meaningful eight-figure value creation across the portfolio over the hold period.
And that is just the merchant services side. Adding bank depository audits to the playbook typically adds another 30 to 50 percent on top of the merchant savings, depending on banking complexity and treasury volume.
Why This Works Better for PE Than for Anyone Else
Three reasons.
Scale. PE firms have multiple portfolio companies, which means the same audit methodology can be executed eight, ten, or fifteen times with diminishing marginal effort. The fixed cost of building the relationship with an audit firm is amortized across the portfolio.
Speed. PE operators are organized to execute initiatives quickly during the value-creation window. Most management teams in standalone businesses lack the bandwidth or mandate to drive a fee audit through to recovery. PE firms do not have that constraint.
Discipline. Operating partners are paid to find recurring EBITDA improvements with measurable returns. A fee audit that returns hard-dollar savings on a contingency basis is exactly the kind of initiative that fits cleanly into the value-creation thesis. There is no implementation risk, no capital outlay, and the payback is immediate.
Why Most Firms Have Not Done It Yet
The honest answer is that most PE firms have not built it into the playbook because they have not seen it work. Merchant services has historically been treated as a back-office cost line that is too small to matter at the GP level. That changes the moment a firm runs the analysis on one portfolio company and sees the recovery.
Once it is on the playbook, it becomes one of the cleanest, most repeatable, and most scalable EBITDA initiatives a PE firm can execute. And because the engagement is contingency-based, the downside is genuinely zero.
The Next Step
If you are an operating partner or a portfolio CFO and you have never run a merchant services audit on the portfolio, the first step is the same as it is for any other prospect. Send ninety days of statements from one portfolio company. Within five business days, you will have a written savings estimate showing exactly what is recoverable. From there, you decide whether to roll the playbook out across the rest of the portfolio.
The audit is free. The engagement is contingency-based. The risk is zero. The EBITDA impact is real.
