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| Clermont Meridian Trading Outlines Visa's $5.3 Billion Deal to Acquire Fintech Company Plaid |
In a $5.3 billion deal, the companies announced Monday, Visa is buying Plaid, a Silicon Valley startup. The analysts have studied the acquisition at Clermont Meridian Trading, a financial services company.
Plaid's API software, dubbed the "plumbing" underlying fintech companies, allows startups to connect to their customers' bank accounts. Although it is well-known among financial technology developers, the average individual who interacts with it is unlikely to know the name. Plaid's high-profile customers include Venmo, a popular peer-to-peer payment service. Robinhood, a mobile investment platform, and Coinbase and Gemini, two cryptocurrency exchanges.
Plaid said that one out of every four consumers in the United States with bank accounts had connected to the fintech startup via an app as of December. The venture arms of Citi and American Express and Visa, and rival Mastercard were early investors in the startup.
According to Clermont Meridian Trading analysts, Goldman Sachs, which was also an early investor, was the deal's exclusive advisor. Plaid raised $250 million in a Series C fundraising round in 2018, valuing the company at $2.7 billion. It also added Mary Meeker, a well-known venture capitalist, to its board of directors.
Plaid has grown at a compound annual growth rate of almost 100 percent since 2015, according to Visa CEO Al Kelly, who spoke with investors on Monday. The transaction, according to Kelly, is a "long-term" investment that will position Visa over the next decade. According to Kelly, it will help the company extend its total addressable market and ties with fintech companies and accelerate Plaid's growth.
Kelly commented on the acquisition, "This fits well, strategically." "We're excited about new businesses and the potential for them to help us expand our revenue faster in the long run." According to Visa, the purchase has the potential to boost the company's net revenue growth by as much as 100 basis points by 2021.
Plaid's customer base has continuously risen since its inception in 2013. The company works with over 11,000 institutions and links to over 200 million consumer accounts. Plaid said its customer base increased from 2017 to 2018 and has expanded to the United Kingdom and Canada, though it did not provide particular numbers or a complete list of organizations.
Plaid CEO Zach Perret told Clermont Meridian Trading that the Plaid team first met Visa through a strategic investment, which served as a "jumping-off point" for a series of meetings leading up to the purchase. Perret, who co-founded Plaid with William Hockey, a former Bain colleague, said the Visa brand would help the company scale its products and global footprint.