Why was Visa’s acquisition of Plaid worth so much?

Q: Why was Visa’s acquisition of Plaid worth so much?

Fear.

Visa is worried about disruption. There is incredible innovation in fintech today — and it is accelerating. Alternate payment networks (a direct threat). Challenger banks (indirect threats). APIs to do everything. And more.

They wanted to make a play to remain the infrastructure of payments.

And the price was $5b. Why? That’s what it took to clear a viable return from the last round price (2x the last round price:Visa is acquiring Plaid for $5.3 billion, 2x its final private valuation – TechCrunch). That’s why. Not the revenue multiple, per se.

Visa spent 1% — just 1% — of their market cap as one bet. They bought the infrastructure play with the most traction that they could afford.

And probably, they will need to buy a few more. They can afford it.

They have the market cap (i.e., valuation) to pay up ($450 billion). And disruption faces them for one of the first times in their history.

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Published on February 19, 2020

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