Paypal, the leading online payments system is ready to make its biggest gamble on point-of-sale transactions, small businesses and markets out of America, as the competition between Square, Stripe and others in the world of payments. Indeed, the online payment giant is set to acquire iZettle – a Sweden-based payments provider that holds the tag of “Square of Europe” for a reported fee of $2.2 billion in cash.
The deal is expected to close in the third quarter of this year and iZettle’s co-founder and CEO Jacob de Geer is expected to remain at the head of his company. Other important executives of the company will also keep their roles in the business post-acquisition. With this deal, Paypal announced that they will make the firm become “a center of excellence” for in-store and offline payments in Europe.
“Small businesses are the engine of the global economy and we are continuing to expand our platform to help them compete and win online, in-store and via mobile,” said PayPal president and CEO Dan Schulman in a statement.
The announcement of the deal surprisingly comes only nine days after iZettle filed for an IPO to scale out its business. iZettle looked to raise $227 million on the Stockholm stock exchange to bring the company’s valuation at $1.1 billion. Sources claim that the two companies have been holding talks “for years” and maybe the IPO filing gave somehow a need of urgency to finalize the deal.
PayPal boasts a valuation of around $94 billion and its latest earning report revealed that the San Jose-based company made revenues worth $7.8 billion therefore giving it enough funds to strike off the deal.
In 2015, Paypal made the acquisition of money-transfer startup Xoom for $890 million and previously, the American giant acquired Braintree and its Venmo business for $800 million. However, the iZettle acquisition represents PayPal’s biggest acquisition so far.
“iZettle and PayPal are a strategic fit, with a shared mission, values and culture—and complementary product offerings and geographies. In today’s digital world, consumers want to be able to buy when, where and how they want. With nearly half a million merchants on their platform, Jacob de Geer and his team add best-in-class capabilities and talent that will expand PayPal’s market opportunity to be a global one-stop solution for omnichannel commerce,” added Schulman.
Indeed, iZettle represents a very strategic deal for the American company since the Stockholm-based company has strong presence in 12 markets, several in northern Europe and Latin America; markets where Paypal has a weak presence. For instance, Brazil, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Spain and Sweden. iZettle also has a significant market share in UK, where Paypal is slowly losing ground to rival Square,
“Combining our assets and expertise with a global industry leader like PayPal allows us to deliver even more value to small businesses to help them succeed in a world of giants,” de Geer said in a statement. “The combination of iZettle and PayPal will provide tremendous benefits to our merchants who will have access to an even wider range of tools to help them get paid, sell smarter and grow.”
The IPO filing of iZettle revealed that the firm was not yet profitable, although it has been able to reduce losses. In Q1 2018, the Swedish company filed negative earnings before tax. However, the company is predicting gross revenues worth $165 million in 2018, with $6 billion of total payment volume generated from its platform. Additionally, the platform has been growing at a CAGR of 60% between 2015-17.