Moneygram International: Case study of a fund transfer company

Résumé du document

Moneygram Company was founded in 1940. Initially, the company was named Traveler's Express Company.
In 1998, it acquired Moneygram Payment systems Inc (a company specialized in transfers of money) and then changed its name to Money gram International Inc in 2003. This acquisition was probably the most significant in the company's history but definitely not the only one. The growth strategy relies on external growth in addition to organic growth meaning that the company expands its activities mostly through acquisitions. Other important acquisitions the company made include ACH Commerce in April 2005 (an automated clearing house payment processor) and Money Express SrL in 2006 (an Italian financial services company).All these operations enabled the company to grow rapidly and become one of the leading actors in the field of financial services. The company's services are provided through a network of financial agents located all around the world. However, the current focus of the company is to expand its activities in Europe, it had to review its distribution model in order to comply with European financial and legal regulation (for instance, a 2005 European directive on financial services requires any operator in this sector to take some measures in terms of management, cash-flows…). It therefore relies on locally owned retail stores in Europe to distribute its products, in addition to their traditional agent model.

Extraits

[...] Money gram negotiates partnerships with companies so that the customers can pay their invoices through such network of agents Payment Services In this segment, the company's customers are financial institutions. Money gram sells payment processing services to these institutions. This activity accounts for of the company total losses in 2007, with 920 million dollars operating losses. This activity is currently in the process of being restructured as Money gram will focus on small and mid-sized institutions. It also received termination agreements from some of its partners, representing a total amount of 132 million dollars. Money gram will realign on highly liquid assets. [...]

[...] The Beta records how volatile and risky investing in an individual stock is, compared to the risk of the equity market as a whole. The higher it is and the riskier the investment as the return expected by investors will be higher. Moneygram has a huge Beta in comparison to the industry and its sector. It is therefore considered as a risk business. The company is indeed very exposed to different types of risks that we mentioned in the first part of the document. [...]

[...] The distribution agreement between the two companies is applicable till 2013 and Wal-Mart managed to have Money gram concede a significant increase in their commission rate. ACE Cash Express is also one of Money gram's biggest agents. a. Money transfer It represents of the segment revenues. The money transfer services are Distributed in a network of 150.000 locations, in 180 countries. The strategy of development relies on expanding the network. The revenues are based on the fees and the interests on money conversion. b. Money order These are the company grass roots. [...]

[...] Most of these are risks that the company can not directly control. For instance, the subprime crisis, or a default from one partner can lead to important losses when it is quite hard to control. The company risk management policy would however be taken into account by the investors. For instance the press releases seen before about judicial issues that Moneygram faces could be considered as a default in the risk- management policy. The dividend yield is the ratio of annualized dividends to the price of a share. [...]

[...] They always need to be compared between them (ratios), but also with other companies and also to look at the evolution. These comparisons are that which permitted us to see that the situation of Moneygram were not only the result of the subprime crisis, and a recent difficulty. [...]