Square to acquire Afterpay

Buy now pay later

On August 1, Square announced plans to acquire Afterpay, the Australian “buy now, pay later” firm, in an all-stock deal valued on announcement at US$29bn (A$39bn). Square’s share price is up a bit post-announcement, increasing the value of the deal at Square’s current share price to about US$33bn. Both Square and Afterpay are interesting companies and this transaction appears to be quite synergistic, enhancing and accelerating the integration of Square’s merchant and consumer (cash app) ecosystems in ways that Square was unable to achieve on its own.

Buy now pay later (BNPL) may seem like a new concept to some of you, but it is not. The retailing industry has a long history of extending credit to its customers, pre-dating the existence of bank credit cards (and even store cards for that matter). Most retailers have gotten out of the direct credit business and have laid off their customer credit on others better able to absorb the risks (eg credit card companies) . But this doesn’t mean that retailers are indifferent to the financing options available to their customers and credit cards are not the only approach that makes sense for merchants and consumers. Quite the contrary in fact, as reflected in the commercial success and strong growth of both Square and Afterpay.

The Square-Afterpay deal seems like an important transaction in a fast growing fintech segment, so I thought it worth writing about (albeit somewhat belatedly). But I do not have much to add in the way of personal insights or perspective, so I will refer you to a much more knowledgeable source, Marc Rubinstein, author of the highly regarded Net Interest newsletter. I encourage you all to read Marc’s analysis here, and click through to his other related posts for some more industry and company background.

For a bit more on the transaction itself, I refer you also to this WSJ article and this Square press release.