The $39 billion deal in 11 weeks: how Square bought Afterpay

Jack Dorsey introduced the world to expressing itself in just 140 characters as the creator of Twitter Inc, and his payments company, Square Inc, also likes getting straight to the point.

Square’s purchase of Australian buy now, pay later provider Afterpay Ltd for $39 billion in stock, the largest ever acquisition by Dorsey’s firm, was consummated within three months, said four people with knowledge of the deal talks.

Such a short time is regarded as uncommon in the world of huge cross-border M&As, where armies of advisers can spend months negotiating key terms and poring over books and business plans to ensure there are no hidden skeletons.

As the business boomed in the past year, Afterpay fielded takeover interest from six potential buyers, including U.S. consumer banks, one of the sources said, but Square made more sense as the companies were already exploring services tie-ups.

Square wanted to provide a buy now, pay later feature for its popular Cash app, while Afterpay hoped to accelerate growth in the U.S. market, in competition with Affirm and Klarna.

The deal talks for the largest buyout ever for an Australian firm started last year to explore a strategic partnership in response to growing competition from incumbents, and turned towards acquisition after key executives of the two firms met in Hawaii in May, three of the sources said.

The executives left the tropical island after a couple of days with the agreement that they needed to be combined, the sources said, adding that it took just 11 weeks from that point to finalise the transaction terms.

There were good reasons for the speed – banks and new entrants are aiming for a bigger slice of the buy now, pay later services that have boomed in the past year, as homebound consumers used them to borrow and spend online during the coronavirus pandemic.

The Australian firm’s share price slumped 10 percent on July 14 on media reports that Apple Inc was working on a buy now, pay later feature in coordination with Goldman Sachs Group Inc.

Such volatility put an emphasis on brevity. Shares in both companies reacted positively to the deal.

On Monday, Afterpay closed in Sydney up 18.76 percent, while Square climbed 10.15 percent in New York, despite the prospect of shareholders being diluted by the new shares to pay for the profitless Australian company. Afterpay rose a further 11.3 percent on Tuesday.

Spokespersons at Square and Afterpay declined to comment on the deal background. The sources declined to be named as they were not authorised to talk to the media.

‘Project Pocket’

Buy now, pay later firms lend shoppers instant funds, typically up to a few thousand dollars, which can be paid off interest-free. They generally make money from merchant commissions and late fees, rather than interest payments.

In this way, they sidestep the legal definition of credit and therefore credit laws.

That means such providers are not required to run background checks on new accounts, unlike credit card companies, and normally request just an applicant’s name, address and birth date. Critics say that makes the system an easier fraud target.

Executives at Square and Afterpay shared a desire to expand access to customers globally and saw combining forces as the best way to take on competitors, both present and potential, in the business, the sources said.

Afterpay co-founder Nick Molnar first got to know Amrita Ahuja, chief financial officer at Square, years ago when he was living in the United States. Ahuja then introduced the Australian to Dorsey, said one of the sources.

The deal talks, internally named “Project Pocket”, picked up pace after Afterpay engaged Goldman to explore a U.S. listing in April, said another, which was soon followed by Square showing an interest in buying the company.

Soon after, Afterpay hired boutique Qatalyst Partners to evaluate the offer, with the option that if the deal fell through they would push ahead with the plan for the U.S. listing, said another person.

Sydney-based boutique advisory Highbury Partners was also retained by Afterpay’s board.

The Hawaii trip finally led to the conclusion that each had what the other wanted.

For Square, it was Afterpay’s expertise in buy now, pay later and its existing relationships with large merchants. And Afterpay envied Square’s vast reach and popularity in the U.S. market.

(Reporting by Krystal Hu in New York, Paulina Duran in Sydney and Scott Murdoch in Hong Kong, Writing by David French; Editing by Sumeet Chatterjee and Clarence Fernandez)

News Related

OTHER NEWS

Stroke victims recover best if rehab starts 2-3 MONTHS after the event

© Provided by Daily Mail MailOnline logo Stroke victims are able to recover more effectively if their rehab doesn’t start until 2-3 months after the event, rather than within weeks, ... Read more »

US officials can't decide if Honor smartphones are a national security threat

Late last year, Chinese electronics manufacturer Huawei sold its budget mobile brand Honor to “ensure” it would survive the sanctions the US had issued against its own business. The move ... Read more »

The next batch of Amazon Echo devices will be unveiled on September 28

Amazon will hold its annual hardware and services event on September 28 at 9 am PST / 12 pm EST / 5 pm BST, the company announced today.  The annual ... Read more »

New Star Wars game from Quantic Dream reportedly in the works

© Image: Quantic Dream Quantic Dream’s Detroit: Become Human The studio behind Heavy Rain, Beyond: Two Souls, and Detroit: Become Human, Quantic Dream, is moving from androids to droids. It’s ... Read more »

U.S. securities regulator probing Activision over workplace practices - WSJ

© Reuters/MIKE BLAKE The entrance to the Activision Blizzard Inc. campus is shown in Irvine, California (Reuters) – The U.S. securities regulator is investigating Activision Blizzard’s handling of employees’ allegations ... Read more »

Apple TV Plus prices: are the app's shows and movies are worth the cost for you?

© Provided by GamesRadar Apple TV Plus prices deals Apple TV Plus prices are competitive at $4.99 per month, and that includes ad-free 4K content. The service’s selection of Apple ... Read more »

Black Friday PS5 deals 2021: what's in store later this year?

© Provided by GamesRadar PS5 restock update tracker PS5 Black Friday deals are set to be hot property this year, especially as recent months have been painfully dry for PS5 ... Read more »

Microsoft and Google top 2021 vulnerability charts

© Windows Central Microsoft logo The names Microsoft and Google and the word “vulnerabilities” go hand in hand. What you need to know According to Atlas VPN, Microsoft and Google ... Read more »

Senate Democrats call on FTC to fix data privacy ‘crisis'

© Illustration by Alex Castro / The Verge Senate Democrats are calling on the Federal Trade Commission to write new rules to protect consumer data privacy in a new letter ... Read more »

From cravings to daytime tiredness, these subtle signs mean you may not be sleeping enough

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. Though you’re unconscious for much of the night, what happens while ... Read more »

Cenava W81H rugged Windows tablet

The Ceaeva W81H is a product that warrants its own category. Windows tablets are not a rarity per se but rugged versions with 4G connectivity area and a surprisingly low ... Read more »

5 Google Calendar tricks to ensure you never miss a date

This story has been updated. It was originally published on April 26, 2017. © Nadeena Granville / Unsplash When you have lots of events, you need to keep them organized. ... Read more »

No, Elon Musk doesn't want to give you crypto - it's a scam

A series of spam email campaigns have appeared online over the past few weeks which are being used to promote the latest Elon Musk-themed cryptocurrency giveaway. As reported by BleepingComputer, ... Read more »

At just $64, now's the time to buy an Echo Show 8 — it's over 40 percent off at Amazon

We may receive commission from purchases made via links on this page. Pricing and availability are subject to change. Hi, grandma! (Photo: Amazon) PSA: Amazon is dropping unreal deals left ... Read more »

Final hours: Save $480 on an Awara mattress with $499 in free accessories at this extended Fall sale

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. The Awara mattress is one of the best beds we’ve ever ... Read more »

Best wireless headphones 2021

Best wireless headphones Buying Guide: Welcome to What Hi-Fi?’s round-up of the best wireless headphones you can buy in 2021. © Provided by What Hi-Fi? Apple AirPods Max Wireless headphones ... Read more »

Twitter is down for some users

If you’re having issues accessing Twitter right now, you aren’t alone. The social network is experiencing problems for at least some users. Some Twitter users, including TechRadar staff, are currently ... Read more »

The best meat thermometer we've tested is on sale for an incredible price

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. If you’re starting to see visions of Thanksgiving turkeys dancing in ... Read more »

'Potentially damaging' council and civil service data for sale on dark web, finds investigation

Hacker on the web – Getty Images Thousands of “potentially damaging” pieces of information, including passwords for civil servants, are for sale on the dark web, an investigation has found. ... Read more »

Who knew you could grab Wyze's latest smart-home cam for just $31 at Amazon?

We may receive commission from purchases made via links on this page. Pricing and availability are subject to change. Shoppers say this $31 cam is just as good as (way) ... Read more »

With the help of IT, anyone can build low-code apps—fast

The demand for new business applications has outstripped most IT department’s ability to deliver. Yet the demand continues to grow and the enterprise “app gap” gets wider every day.  One ... Read more »

New Microsoft Surface Pro X documents suggest an imminent launch

Microsoft may be set to release a new Surface Pro X running Windows 11 on ARM this month at its Surface event on September 22. The latest news comes from ... Read more »

No one can really say when the chip shortage will end - here's why

Since the global chip shortage began, many industry executives and commentators have ventured to estimate when it might come to an end. It is universally accepted that the shortage came ... Read more »

How citizen developers can solve the pro-code talent crisis

Odds are that every business has tedious manual processes that a new or improved app could help solve. The problem: not enough developers in IT to work on them. Here’s ... Read more »

Coinbase cancels Lend program launch after SEC fight

Crypto exchange Coinbase has discontinued its plans to launch a Lend feature designed to let customers earn interest on certain coins as reported by Bloomberg. The company announced the change ... Read more »

Amazon will hold a hardware event on September 28th

Amazon will host a hardware event on September 28th at 12PM ET, the company announced today. The retailer promised to share news about its latest “devices, features and services” in ... Read more »

Balenciaga is now selling Fortnite-themed drip

Fortnite is taking a step closer to creating the broadest metaverse around with its latest crossover. Instead of a partnership with the likes of other games or Ariana Grande, Epic ... Read more »

GM says defect-free Bolt batteries are in production

LG is once again making batteries for the Chevy Bolt, and General Motors says that it worked closely with the South Korean giant to make sure the new cells are ... Read more »

Grime-loving bacteria could save priceless art

Bacteria and other tiny organisms have traditionally been viewed as a threat to art. But a small number of researchers in Europe are making microbes work for them. Specialized microbes ... Read more »

How low-code helps people creatively meet their application needs

There’s no denying that modern businesses have more needs — and opportunities — for enterprise applications than ever before. But often, developers (and everyone else) in IT are already maxed ... Read more »

The cheapest iPhone 13 Pro SIM-free prices in September 2021

iPhone 13 Pro Fact File (Image credit: Future) Release date: September 24 2021 Launch Price: $999 | £949 | AU$1,699 Platform: iOS 15 Storage: Up to 1TB Camera: 12 + ... Read more »

The Walking Dead season 11 episode 5 recap: an overly busy episode with great moments

About this episode – Episode 5 (of 24), ‘Out of the Ashes’ – Written by LaToya Morgan – Directed by Greg Nicotero ★★★ Spoilers for The Walking Dead season 11 ... Read more »

Hands on: Cenava W81H rugged Windows tablet review

The Ceaeva W81H is a product that warrants its own category. Windows tablets are not a rarity per se but rugged versions with 4G connectivity area and a surprisingly low ... Read more »

Explore Mars in 3D with NASA's new interactive tools

Did you know Neural is taking the stage this fall? Together with an amazing line-up of experts, we will explore the future of AI during TNW Conference 2021. Secure your ... Read more »

Emmanuel Macron's vision of French supremacy is dead in the water

French President Emmanuel Macron speaking at the Elysee – Gonzalo Fuentes /Reuters Pool France's submarine fiasco has proved a rude awakening over its limited clout on the world stage. Australia ... Read more »

La Palma: Thousands evacuated and 100 homes destroyed as Cumbre Vieja volcano erupts

Around 5,000 people on La Palma in the Canary Islands have been evacuated to escape the erupting Cumbre Vieja volcano. The eruption started on Sunday afternoon and officials said about ... Read more »

Twitter to pay $809.5 million to settle shareholder lawsuit

SAN FRANCISCO (AP) — Twitter said Monday it will pay $809.5 million to settle a consolidated class action lawsuit alleging that the company misled investors about how much its user ... Read more »

Three 5G rollout will be affected if mast sale is blocked

© Provided by TechRadar 5G Three’s parent company CK Hutchison has rebuffed suggestions from competition authorities that the proposed sale of UK mobile towers to Cellnex would negatively impact competition ... Read more »

Keep the noise down with these office-friendly keyboards

When you’ve got a busy day of office productivity ahead of you, it’s best to use a keyboard that’s on the quiet side. The reduced noise help you stay focused, ... Read more »

Iowa farm services firm: systems offline due to cybersecurity incident

CHICAGO (Reuters) -Iowa-based farm services provider NEW Cooperative Inc said on Monday its systems were offline to contain a “cybersecurity” incident that it did not specify but later said it ... Read more »