By Marcus Falck, Edvard Bruu (Stockholm School of Economics), Christopher Shim, Angela Xia, Karthik Neelamegam, Adit Rajeev (University of Cambridge)
Overview of the deal
Estimated value: $5.3 billion
Announcement date: 13th January 2020
Acquirer Advisors: Lazard
Target Advisors: Goldman Sachs
Visa is buying fintech company Plaid for $5.3 billion. Plaid’s latest funding round valued the company at $2.65 billion, exactly half the number that Visa is paying for the company. The high price tag comes in the midst of an uptick in capital flowing into M&A in the payments and fintech space – in turn stimulated by rapid industry consolidation as providers aim to fight off competition from start-ups, more adequately prepare for major swings in the fintech arena, and combat low margins. Current industry momentum around firms like Plaid, together with the target’s standing and global reach, could help explain the price premium.
Connectivity between financial institutions and developers has become increasingly important to facilitate consumers’ ability to use fintech applications. 75 percent of the world's internet-enabled consumers used a fintech application to initiate money movement in 2019 versus 18 percent in 2015. Plaid has been a leader in enabling this connectivity at scale. Today, one in four people with a U.S. bank account have used Plaid to connect to more than 2,600 fintech developers across more than 11,000 financial institutions.
This deal represents both an entry into new ventures and complementary improvements to Visa’s existing enterprise. Plaid’s fintech-centric business opens new market opportunities for Visa globally and the deal allows the NewCo to deliver augmented payment capabilities and associated value-added services to fintech developers. The acquisition should also provide Visa the opportunity to work intimately with fintechs through all stages of their growth while also accelerating the development of Visa’s core business. Once closed, the NewCo will likely deliver substantial advantages to developers, financial institutions and consumers.
“The combination of Visa and Plaid will put us at the epicentre of the fintech world, expanding our total addressable market and accelerating our long-term revenue growth trajectory.” - Alfred Kelly, CEO & Chairman of Visa
Company Details (Acquirer - Visa)
Visa Inc. is a global payments technology company that facilitates commerce through the transfer of value and information among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. It operates VisaNet, a processing network that enables authorization, clearing, and settlement of payment transactions. Visa Inc. also offers card products, as well as value-added services. It provides its services under the Visa, Visa Electron, Interlink, V PAY, and PLUS brands. The company has a strategic partnership with NovoPayment to enable financial institutions and merchants to deploy Visa’s digital solutions in Latin America and the Caribbean.
- Founded in 1958
- CEO: Alfred Kelly
- Number of employees: 19,500
- Market Cap: $437.1 billion - EV: $ 444.7 billion
- LTM Revenue: $23.0 billion - LTM EBITDA: $15.7 billion
- LTM EV/Revenue: 19.4x - LTM EV/EBITDA: 28.3x
Company Details (Target - Plaid)
Plaid Inc enables users to connect their bank accounts to an app. The company aims to democratize financial services via technology and construct consumer experiences, developer-friendly infrastructure, and intelligent tools that allow users to solve problems by creating products. Plaid offers a set of technical infrastructure APIs that enable developers to build financial products for connecting consumers and traditional financial institutions. Its product suite provides transaction histories, authentication for ACH and ETH payments, identity verification, real-time balance verification, and more. The company’s products are used for personal finances, consumer payments, lending, banking and brokerage, and business finances. It serves Fortune 500 companies.
- Founded in May 2013
- CEO: Zach Perret
- Number of employees: 420
- Market Cap: $N/A - EV: $ Non-disclosed
- LTM Revenue: $110.9 million - LTM EBITDA: $Non-disclosed