BankTechM&A / Funding

Visa, Plaid terminate $5.3 billion merger agreement

Deal was originally announced nearly one year ago to the day

Almost exactly a year after announcing their $5.3 billion merger, Visa and Plaid have called off the proposed marriage, and the U.S. Department of Justice has agreed to drop its antitrust lawsuit challenging the deal.

Visa announced termination of the deal and the lawsuit in a Jan. 12 news release.

“We are confident we would have prevailed in court as Plaid’s capabilities are complementary to Visa’s, not competitive,” said Al Kelly, chairman and CEO of San Francisco-based Visa. “We believe the combination of Visa with Plaid would have delivered significant benefits, including greater innovation for developers, financial institutions and consumers. However, it has been a full year since we first announced our intent to acquire Plaid, and protracted and complex litigation will likely take substantial time to fully resolve.”

In a Jan. 12 conference call, Kelly explained that it had become “quite clear” in recent weeks that the Department of Justice was unwilling to work with Visa and Plaid to bring the legal action to “a timely and reasonable conclusion.”

“The reality is that we’re making a judgment that there’s plenty of opportunity in this very fast-moving space,” Kelly said, “and we’re just going to move on with life and take advantage of these other opportunities rather than get bogged down in a long, drawn-out process that’s already been long, never mind how much longer it would go.”

Declining to discuss potential fintech acquisitions, Kelly noted that Visa prefers to focus first on organic growth, followed by partnerships and acquisitions. Visa works with fintechs as both customers and partners, he pointed out. The company cultivates partnerships through its Fintech Fast Track Program.

“Fintechs have been very important to us for probably the last three years, and we’ve been very engaged with them,” Kelly said on the conference call.

Zach Perret, co-founder and CEO of San Francisco-based Plaid, said the merger of his fintech company with payments giant Visa “would have been a great combination.” However, they’re not parting ways. Perret said Plaid will continue to collaborate with Visa as a strategic investor and partner.

“This past year saw an unprecedented uptick in demand for the services powered by Plaid, and our priority is to support the hundreds of millions of people who now rely on fintech,” Perret said in the news release. “We made great strides last year, growing our customers by more than 60 percent and adding hundreds of banks to our platform.”

In November, the Department of Justice (DOJ) sued to block Visa’s proposed purchase of Plaid. The DOJ complained that Visa was buying Plaid to eliminate a competitor in the lucrative business of online debit transactions. Visa had objected to the DOJ suit, arguing that Plaid is not a payments company and, therefore, is not a direct competitor.

Plaid’s technology enables apps to connect with users’ bank accounts. Its customers include fintech platforms like Venmo, SoFi, Betterment, Square, PayPal, Robinhood and Affirm, as well as tech players such as Google and Microsoft.

“In addition to our ongoing focus on helping companies of all sizes deliver digital financial products, we have made significant progress in the ways that we work with financial institutions. Delivering on the promise of open finance is in everyone’s best interest, and we’ll be working in lockstep with our customers and financial institutions to bring this to fruition globally,” Perret wrote in a blog post.

Since its founding in 2013, Plaid has collected $309.3 million in funding. Aside from Visa, Plaid’s investors include Goldman Sachs, a16z (Andreessen Horowitz), Citi Ventures, American Express Ventures, GV, Index Ventures, NEA and former Kleiner Perkins partner Mary Meeker. Its most recent valuation was $5.3 billion.

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