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Square makes ‘game-changing’ play for Afterpay in big bet on buy-now pay-later wave

Square Inc. plans to acquire buy-now pay-later (BNPL) operator Afterpay Ltd. in what one analyst sees as a “game-changing” $29 billion deal.

8/2/2021 11:56:00 PM

Square Inc. plans to acquire buy-now pay-later (BNPL) operator Afterpay Ltd. in what one analyst sees as a “game-changing” $29 billion deal.

Square Inc. plans to acquire buy-now pay-later (BNPL) operator Afterpay Ltd. in what one analyst sees as a 'game-changing' $29 billion deal that will help...

Through the deal, announced Sunday night, Square SQ, +10.16% looks poised to grow its reach with larger merchants and internationally, while driving crucial links between its consumer and seller businesses. The company would also introduce users of Square’s consumer-facing Cash App product to Afterpay’s APT, +18.77% AFTPY, +35.16% installment offerings, which let people make purchases in interest-free chunks in a challenge to the traditional credit model.

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Square shares are up more than 11% in Monday trading following the announcement.See also: Square posts upbeat profits while also announcing $29 billion deal for AfterpayThough Square had already taken some early steps toward uniting its merchant and consumer businesses through rewards, the Afterpay deal should allow the company to drive connections between those two businesses in a more substantial way. Square sees Afterpay’s BNPL offerings as a perk that could draw more people to its Cash App mobile wallet and entice them to shop at partnering merchants that use Afterpay installment technology.

“In essence, Afterpay addresses almost all major challenges Square faces in its ambitions to become a dominant payments ecosystem,” Bernstein analyst Harshita Rawat wrote in a note to clients titled: “A game-changing deal.”Connecting the merchant and Cash App businesses is “the holy grail” for Square, with the potential to put the company on track for faster long-term growth, according to Rawat. The customer bases of the two companies are also “deeply synergistic,” she noted, as the Cash App is known for its exposure to underbanked users in the southern and southeastern U.S., while Afterpay has a more affluent and coastal presence.

In general, Square’s revenue comes almost entirely from the U.S., while Afterpay derives a large chunk from Australia and Europe.RBC Capital Markets analyst Daniel Perlin commented that Afterpay’s global base of over 100,000 merchants “should accelerate Square’s growth with larger sellers and expend into new geographies, while further enhancing merchant acquisition.” Afterpay gets most of its volume from enterprise merchants.

Square will also get the opportunity to introduce Afterpay customers to its financial offerings, including a brokerage platform and money-transfer capabilities.The buy now, pay later wave: Afterpay, Klarna, Affirm and rivals hope to take U.S. by storm

In the long term, the deal gives Square a chance to participate in the BNPL rush that is starting to make waves in the U.S. after strong success in markets like Australia and Sweden. In Australia, BNPL has moved beyond e-commerce into everything from medical bills to local services, such that people use service for in-store purchases and the word “Afterpay” is treated as a verb, said Dana Stalder, a partner at Matrix Partners who serves on Afterpay’s board of directors.

“You will see this pop up…globally in every category where digital payments exist today,” he told MarketWatch. “This will take a share of what has traditionally gone through credit card rails.”Part of Afterpay’s promise extends into merchant discovery, as its app helps facilitate “lead generation for merchants and consumer engagement,” according to Square’s investment presentation. The company plans to integrate that component into the Cash App.

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Stalder notes that in Australia, Afterpay has translated that approach to the offline world with an “Afterpay Day” event akin to Inc.’s AMZN, +0.12% Prime Day. In addition to advertising online deals for Afterpay users, the company worked with merchants to promote in-person discounts, making it so Afterpay signage was plastered across malls.

“It’s like nothing we’ve ever seen in the U.S. market,” he said. “It shows how Afterpay and the partnership they have with retailers goes well beyond being payment type” given a “focus on driving incremental volume.”BNPL is the fastest-growing online payment type in the U.S. and U.K., according to a recent industry report from FIS, which predicted 33% annual growth in the overall BNPL market over the next three years.

While the deal price amounts to 42 times Afterpay’s revenue for its June-ended fiscal year, BTIG analyst Mark Palmer wrote that “the implied multiple of its Read more: MarketWatch »

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Jack Dorsey's Square to buy Afterpay for $29 billion in stockBusiness Insider tells the global tech, finance, markets, media, healthcare, and strategy stories you want to know. Toxic. Of course they did.... And the Social Control just wants to know how Francisco Partners negotiated our services and products with DeptofDefense and other governments. It's amazing, the EmbaixadaEUA doesn't have an e-mail service to request information! Cc: jack PomerantzLLP 👉🏽PegasusProject

Square Agrees to Acquire Afterpay for $29 Billion in All-Stock DealSquare agreed to an all-stock deal worth around $29 billion to acquire installment-payment company Afterpay Nice! $ALPP August is the turn-around month for Alpine, expected amazing financial report along with uplist to NASDAQ and then announcement of new acquisitions - it's going to go parabolic. For a group focused on ALPP and similar cracking stocks - come join us; this is terrible news

Square to buy Australia's Afterpay in $29 bln all-stock dealU.S. fintech company Square Inc (SQ.N) said on Monday it had agreed to purchase Australian buy now/pay later giant Afterpay Ltd (APT.AX)in an all-stock deal worth about $29 billion. cc: Techmeme

Square posts upbeat profits while also announcing $29 billion deal for AfterpaySquare Inc.'s surprise release of its quarterly earnings report Sunday was its second-biggest news of the night, behind the announcement that it plans to...

Square Acquires Afterpay for $29 Billion in All-stock DealSquare Inc. said it reached a deal with Afterpay Ltd. to acquire the buy now, pay later company in an all-stock deal valued at $29 billion.

Square to buy Australia's Afterpay in $29 billion deal as 'buy now, pay later' trend takes offJack Dorsey's payment company announced a $29 billion, all-stock deal to buy Australia's Afterpay as the installment loan competition heats up. $SQ 246 LONG Debt as a subscription. Bitcoin