Stripe and private equity firm Advent International have ended their $53 billion pursuit of PayPal.
The proposed deal had been rumored since February and reported widely over the past month. Had it been completed, the deal would have been the largest fintech acquisition in history.
According to reporting in Reuters, PayPal found the initial bid insufficient, and the two sides failed to negotiate an acceptable higher price.
“PayPal will likely not be interested in another buyer immediately but go back to the drawing board and reposition the organization to demonstrate that $53 billion price tag,” said Ben Danner, Senior Analyst, Debit at Javelin Strategy & Research. “We could also see potential deals where pieces of PayPal are sold off rather than a full acquisition.”
Many Hurdles to Overcome
The acquisition would have created a giant in the payments landscape, but there were always significant concerns about how the two companies would be integrated. Stripe, which built its business around its payments platform, lacks a consumer-facing business, raising questions about whether it could manage assets like Venmo and PayPal’s digital wallet. The deal would have also involved substantial integration costs. Experts think those factors may have contributed to the acquisition falling apart.
“The deal depended on PayPal acting like a distressed seller,” said James Wester, Co-Head of Payments at Javelin. “Stripe was not going to get a plug-and-play product. It was buying decades of accumulated technology and inviting a great deal of regulatory scrutiny. The acquisition would have required extensive integration and possibly the eventual sale of some pieces.
“Meanwhile, PayPal’s stock had risen above the offer, adding billions to the cost of getting the deal done,” he added. “That likely made the reported $50 billion financing package, combined with the technical complexity and regulatory risk, much less attractive to Stripe and Advent, and gave PayPal even less reason to accept.”
Money Issues
As of Friday, PayPal stock carried a market cap of roughly $52.5 billion, close to the offer that Stripe and Advent had made. The company’s stock had risen more than 40% this quarter on the takeover speculation combined with a second-quarter earnings beat.
Stripe’s attention has also been diverted in different directions recently. In the midst of its negotiations with PayPal, Stripe agreed to acquired AI model marketplace OpenRouter for more than $7 billion, in a stock transaction.
