VISA’s $5.3B Plaid Purchase Gets Canceled

SAN FRANCISCO – Visa (V: NYSE) and Plaid have ended their agreement for a merger, concluding any hopes of the former, a global financial giant and major payment card company acquiring the data-centric fintech start-up.

Since announcing the deal nearly a year ago; both parties have agreed to end negotiations. This was following a suit filed by the DOJ last year to end the takeover bid, citing section 15 of the Clayton Act and Section 4 of the Sherman Act. Despite initially arguing that the argument was ‘fundamentally flawed’, Visa conceded that a ‘protracted and complex litigation will likely take substantial time to fully resolve’

The motion filed by the DOJ’s Antitrust Department in November last year centred on the fintech’s efforts to create an innovative substitute to Visa’s existing payment solution. The prosecutor’s office argued that Visa is a ‘monopolist in online debit transactions, extracting billions of dollars in fees annually from merchants and consumers’ and the purchase of Plaid, would essentially ‘eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services’.

This is not bad news for Plaid. Analysts have suggested that the valuation was too low, ironically because Plaid acquired a 60% increase in its customer base following the initial takeover announcement. Plaid’s leadership issued a statement reiterating their commitment to continued growth, dismissing any hopes of a potential SPAC led IPO. Visa continues to be a major investor in the company.

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Visa acquires Plaid for $5.3 billion

SAN FRANCISCO – Visa Inc. (NYSE: V) announced that it has agreed to buy privately held software startup Plaid Inc. for a record USD $5.3 Billion. Plaid is a financial data aggregation company that connects end users bank data to various online and mobile platforms, such as Venmo, Acorns and Chime.

“Plaid is a leader in the fast-growing fintech world,” Visa Chairman and CEO Al Kelly said in Monday’s statement.

Consumers rely on Plaid’s apps and services to help plan their spending, increase their savings and monitor their investments. The company claims that its system is used by 1 in 4 users with a U.S. bank account.

This acquisition represents Visa’s growth strategy of gaining entry into new businesses and complementary enhancements to Visa’s existing business.

The transaction also highlights traditional financial firms’ attempt at making inroads into the digital and cashless financial services space; through the acquisition of strong fintech players. It was revealed that both Visa and MasterCard were both investors in the $250 million Series C round that was announced in December 2018. Analysts are now studying similar fintech companies, as well as some of Paid’s competitors, for similar acquisitions.

Continue Reading Visa acquires Plaid for $5.3 billion