$800 Million M&A deal between PayPal and Braintree

Analysts in the industry were speaking about PayPal acquiring Braintree since last week. We first heard about this while doing a story on Facebook, when they launched their Autofill Payment Feature. The rumor mills turned out to be true and the acquisition has gone through. PayPal has made this news public yesterday that they plan to acquire Braintree in an all cash deal worth $800 Million. The acquisition will be completed by the end of the 4th quarter, according to eBay. If you’ve got the math right, the Braintree team of over 180 employees at Braintree will pocket a cool $4.44 Mn from this deal. To add to that all the employees of Braintree get to stay.

On one of PayPal’s sites David Marcus, President of PayPal wrote about the intent behind acquiring Braintree. He writes that Braintree is one of those very few companies who actually provide tools to connect merchants with their customers. Which is in line with one of PayPal’s mission i.e. to introduce innovat[ive] technologies [which] enable businesses to thrive in an increasingly mobile world. Braintree, in a short time has managed to handle transactions in 130 currencies in more than 40 countries. Marcus also writes that Braintree will continue doing what it’s currently doing and there will not be any change in the business operations. PayPal would in fact, help Braintree to scale up internationally and grow.

Braintree’s payment technology has been quite popular and has been used by companies like Airbnb, Uber, OpenTable, etc. Braintree is a Accel Partner backed firm offering services such as payment gateway, billing and card storage, etc. Braintree charges businesses a fee of 2.9% + 30 cents on each transaction. Experts in the payments space believed that Braintree would process $12 Mn in payments by the end of 2013. PayPal’s parent company eBay’s shares closed at $56.64 yesterday and the observers noted a 4.4% rise on Nasdaq.

LTP View: Braintree’s acquisition by PayPal makes sense because PayPal wants to increase its presence on mobile and offline. PayPal has enjoyed the market leader status in the online payments space, through this acquisition PayPal will look to dominate the offline payments space too. Earlier this week we also saw Square and Intuit joining hands together. With the latest news of Braintree’s acquisition, we may expect more such partnerships on the rise.