Merchant Processing Portfolio Sales & Acquisitions

Dilendorf Law Firm represents ISOs and companies nationwide in connection with the buying and selling of merchant processing portfolios, including residual streams, merchant books, and related payment assets.

These transactions are legally complex and often involve hidden contractual, tax, and regulatory risks that can materially affect valuation and enforceability.

Our firm advises sellers, buyers, and investors through every stage of portfolio transactions—from diligence and structuring to closing and post-sale disputes.

Key Legal Considerations in Portfolio Transactions

While merchant processing portfolios are sold across the United States, many of the most significant legal issues arise repeatedly across jurisdictions.

New York law, frequently used as governing law in portfolio agreements, provides a useful framework that often applies nationwide.

Rights of First Refusal (ROFR)

Many ISO and residual agreements include rights of first refusal. When a ROFR exists, the seller is typically required to offer the portfolio to the ROFR holder on the same terms offered by a third party before completing a sale.

Failure to comply with ROFR provisions can lead to disputes, delayed closings, or claims for breach.

Courts have consistently enforced properly drafted ROFRs and permitted sellers to enter contingent third-party contracts, provided the transaction remains subject to the ROFR holder’s waiver or non-exercise. Careful structuring is critical to avoid invalidating the sale.

Enforceability of Transfer Restrictions

ROFRs and transfer restrictions must be clearly defined in the governing agreements. Courts routinely hold that a ROFR does not permit the holder to alter deal terms or impose new conditions beyond those offered to a third party.

Ambiguous notice procedures, unclear timelines, or informal side agreements often become flashpoints in portfolio disputes. We review and structure transactions to ensure compliance with contractual transfer mechanics.

Bulk Sale and Tax Compliance (Nationwide Risk)

The sale of a merchant processing portfolio may trigger bulk sale or successor liability tax rules, which exist in various forms across multiple states.

In New York, for example, failure to comply with bulk sale notification requirements can result in the purchaser being held personally liable for the seller’s unpaid sales taxes.

Similar tax exposure exists in other jurisdictions, even where bulk sale statutes have been modified or repealed.

Buyers must conduct tax diligence, issue required notices, and escrow funds when necessary. Sellers must ensure tax obligations are satisfied prior to closing.

Liability for Unpaid Taxes

Portfolio buyers generally seek to avoid assuming seller liabilities. However, tax authorities may impose liability where statutory procedures are ignored or where transactions are structured improperly.

We advise clients on minimizing exposure to unpaid sales, payroll, and other transactional taxes that can follow portfolio transfers across state lines.

Assumption of Liabilities

As a general rule, a buyer does not assume the seller’s liabilities unless expressly agreed. However, courts recognize exceptions, including:

• De facto mergers

• Fraudulent conveyances

• Transactions where the buyer is a mere continuation of the seller

Portfolio transactions must be carefully structured to avoid unintended liability transfer, particularly where sellers remain active in the payments space.

Warranties of Title and Encumbrances

Sellers typically warrant that:

• They hold good title to the portfolio

• The transfer is rightful

• The portfolio is free of liens or encumbrances

Undisclosed security interests, processor claims, or competing residual rights can derail a transaction or lead to post-closing litigation. We conduct and coordinate diligence to confirm clean title.

Contractual Restrictions and Post-Termination Rights

Residual purchase agreements, ISO agreements, and processor contracts often include provisions that directly impact saleability, including:

• Termination-for-cause clauses

• Post-termination forfeiture of residuals

• Restrictions on assignment

In some cases, residual payments cease entirely upon termination, making advance review essential before marketing a portfolio.

Non-Compete and Confidentiality Obligations

Sellers must comply with existing non-compete, non-solicitation, and confidentiality provisions. Breach can result in injunctions, clawbacks, or damages that materially impair portfolio value.

We help sellers structure compliant exits and buyers assess enforcement risk.

Regulatory Considerations

Certain portfolios may include merchants or verticals subject to heightened regulatory oversight. Failure to comply with applicable federal or state regulations can delay approvals, reduce valuation, or trigger enforcement actions.

Dispute Resolution and Attorneys’ Fees

Portfolio agreements frequently include arbitration clauses, forum selection provisions, and attorneys’ fee-shifting language. These provisions can significantly impact leverage if disputes arise post-closing.

Clear drafting reduces risk and strengthens enforceability.

Our Role

Dilendorf Law Firm advises ISOs and companies nationwide on:

• Portfolio sales and acquisitions
• ROFR analysis and enforcement
• Tax and bulk sale compliance
• Contract review and risk allocation
• Post-closing disputes and litigation

These transactions are not just financial—they are legal events with long-term consequences. Proper structuring at the outset prevents costly disputes later.

Contact Us

info@dilendorf.com | 212.457.9797

Dilendorf Law Firm represents ISOs and payments companies nationwide in sophisticated portfolio transactions where precision matters.