Uruguay’s DLocal Seeks Deals as Cash Pile Grows, Valuations Drop

(Bloomberg) -- Uruguayan payment services company DLocal Ltd. plans to use part of its growing pile of cash to accelerate expansion in developing nations through acquisitions.

The company, which tripled its cash hoard last year to $336 million as of December, is targeting Africa and Asia for potential acquisitions.

“We continue to explore the M&A market on a weekly basis,” Chief Executive Officer Sebastian Kanovich said in an interview from the company's office in Tel Aviv. “We have enough cash on balance and also enough access to capital to fund these acquisitions.”

DLocal, which listed shares in New York last year, helps more than 400 companies including Microsoft Corp. and Shopify Inc. make and receive payments in 35 developing countries. DLocal had largely stayed away from purchasing other companies, with the exception of last year's $40 million acquisition of payment services provider Primeiropay, as it prioritized building its business from scratch.

Now, the company is eyeing acquisitions that would give it access to new clients, products or licenses, Chief Operating Officer Sumita Pandit said. Potential deals are getting cheaper as the drop in technology stocks spills over into private-equity markets, where just months ago companies were selling for “crazy” valuations, she said.

“These won't be billion-dollar deals. We are going to be very disciplined about what we acquire,” said Pandit, who said a deal could come as soon as this year.

DLocal shares have tumbled almost 40% this year alongside the wider rout for tech companies. At $23 on Monday, the stock trades barely above its IPO price of $21 with a market capitalization of $6.7 billion. Shares reached as high as $73 in September, valuing the firm at more than $21 billion.

The stock price “really is not a function of what I think is our intrinsic value, it's a function of what else is available in the market that is extremely, extremely cheap,” Pandit said.

Other key points from the interview:

DLocal's priority this year is growing in its current markets though Kanovich expects to enter new countries depending on the needs of clients.
- “We are excited about Latin America, Africa, Southeast Asia, India. Those are the markets where we think we can add the most value.”
DLocal is exploring how to provide payment services to cryptocurrency exchanges, Kanovich said
- ”We are trying to build partnerships for the next 10 years. We want to make sure we are choosing the right players to work with.”