Square Acquires Afterpay for $29 Billion - BNPL Deal

Square to Acquire Afterpay in $29 Billion Deal

A significant transaction has occurred within the financial technology sector. Square has announced its acquisition of Afterpay, a leading Australian buy now, pay later (BNPL) service, in an all-stock deal valued at $29 billion.

Deal Details and Valuation

The agreed-upon purchase price is determined by Square’s common stock closing price on July 30th, which stood at $247.26. Completion of this acquisition is anticipated during the first quarter of 2022, subject to the fulfillment of specific closing requirements.

This deal represents a premium of over 30% compared to Afterpay’s most recent closing price of A$96.66.

Statements from Leadership

Jack Dorsey, Square’s co-founder and CEO, articulated a shared vision between the two companies. He stated that both organizations are dedicated to creating a more equitable, accessible, and inclusive financial system.

“Afterpay’s brand aligns with our core principles,” Dorsey explained. “By combining forces, we aim to enhance our Cash App and Seller ecosystems, empowering both merchants and consumers with greater control.”

The Rise of Buy Now, Pay Later

This merger will establish a dominant force in the payments industry. The buy now, pay later sector has experienced substantial growth in the last 18 months.

This growth is particularly noticeable among younger demographics who favor installment loans over traditional credit cards and interest payments.

Afterpay’s Reach and Impact

As of June 30th, Afterpay had a user base exceeding 16 million consumers and collaborated with nearly 100,000 merchants worldwide.

These merchants span diverse industries, including fashion, home goods, beauty, and sporting goods.

Integration Plans and Ecosystem Expansion

The integration of Afterpay is expected to accelerate Square’s strategic objectives for both its Seller and Cash App platforms.

Square intends to incorporate Afterpay’s capabilities into its existing business units, enabling even small merchants to offer buy now, pay later options at the point of sale.

Furthermore, Afterpay users will gain the ability to manage their installment payments directly within the Cash App.

Cash App users will also be able to discover merchants and BNPL offers directly within the application.

Leadership Transition

Anthony Eisen and Nick Molnar, Afterpay’s co-founders and co-CEOs, will join Square following the deal’s completion.

They will assume leadership roles within Afterpay’s merchant and consumer divisions. Square will also appoint one Afterpay director to its board.

Shareholder Exchange

Afterpay shareholders will receive 0.375 shares of Square Class A stock for each share they currently hold.

Based on Square’s closing price on Friday, this equates to approximately A$126.21 per share.

Industry Consolidation and Competition

The question of further consolidation within the BNPL space remains open, sparking considerable discussion on platforms like Twitter.

In the U.S., Affirm, founded by Max Levchin (a PayPal co-founder), recently became a publicly traded company.

However, Affirm’s stock closed at $56.32 on July 30th, a significant decrease from its initial price and 52-week high of $146.90.

Meanwhile, Klarna, a European competitor experiencing rapid growth in the U.S., secured $639 million in funding in June, achieving a post-money valuation of $45.6 billion.

The Future of BNPL in the U.S.

This acquisition undoubtedly intensifies the competition for the U.S. consumer within the buy now, pay later market.

The battle for market share is expected to escalate as companies vie for dominance in this rapidly evolving landscape.