Visa will no longer buy Plaid, a fintech company, which on Tuesday announced the “mutual termination” of the $ 5.3 billion deal signed a year ago and thwarted by US antitrust regulators.
Why is this important: It’s more about the growing value of FinTech companies than about the US Department of Justice. It also makes Plaid a very attractive target for growth equity investors, IPOs and SPAC sponsors.
Past: The DOJ filed a lawsuit to block the deal in November, saying it would eliminate Plaid’s future ability to compete in the online debit market, giving Visa a monopoly. Visa said it will defend itself vigorously, in part because Plaid does not have any online debit products or any in development.
- Visa also requested an expedited process to begin in the spring, while the DOJ requested a trial in December. The two sides met just before the holidays, but I’m told the DOJ would only agree to share the difference.
What officially happened next: Visa and Plaid have agreed to waive the agreement with no termination fees payable.
What really happened next: Plaid had cold feet, according to several sources familiar with the situation. Not because of any fault on Visa, but because she knew she was now worth well over $ 5.3 billion. And the combination of the DOJ, and the corresponding shutdown delays, gave it a rescue hatch.
Between the lines: Just watch the news of today’s fintech deal – Affirm goes public at $ 49 per share, after selling shares at around $ 20 per share last September. Blend rises to $ 3.3 billion, doubling its valuation in just five months. Rapyd raised $ 2.5 billion, up from $ 1.2 billion in December 2019. MX raised to a valuation of $ 1.9 billion, quadrupling from mid-2019.
- “It was a stale price,” a source close to the deal said, adding that Visa not paying a termination fee is proof of who walked away from the table first. Another source adds that Plaid had “buyer’s remorse.”
- Plaid couldn’t even take advantage of the slight increase in the Visa share price, as almost the entire transaction had to be paid in cash.
The CEO of the company Zach Perret refused to discuss the tick-tock with me, as a spokesperson for Visa did, but says he and the Plaid board “met a few weeks ago and made the decision to go their separate ways . “
- He added that Visa remains an investor and the two companies may still partner in the future.
- When I asked if the company was going to go into the online debit business now, Perret chuckled without commitment.
What happens after: It is not yet clear. Plaid is said to have a decent cash position, but also has many acquired employees who relied on liquidity. So don’t be surprised to see some sort of secondary offering, or maybe even a SPAC (as it’s a faster route than the IPO, which Plaid wouldn’t have prepared for).