According to the latest news report by Bloomberg, PayPal Holdings Inc. is planning to buy the small-business platform iZettle for a price $2.2 billion. The purchase of this Swedish company is part of PayPal’s plan of expanding its operations in Europe as well as Latin America. This move is also expected to increase the company’s presence in physical stores.
According to PayPal’s Chief Executive Officer Dan Schulman, small businesses are now looking for a full range of capabilities across all payment channels, so iZettle worked out to be a perfect fit for the online payments company in many ways.
The Chief Operating Officer of PayPal also added to Schulman’s comments, stating that this move would help increase the company’s presence for in-store payments. He said that in-store payments using mobile devices, especially in small businesses was a growing phenomenon and that there were many competitors in that market. However, most of them had been centered in only a few countries.
This deal will be the biggest made by PayPal and will help the company compete against rival payments platform Square Inc. The competition is tough since Square made a name for itself making credit card and mobile payments possible for small businesses as well as food truck vendors.
iZettle, founded by Jacob de Geer as well as Magnus Nilsson in 2010, also began life as a mobile app for accepting credit card payments. However, since then, the company has grown to include software and financing services targeted at small businesses. Currently, the company makes wireless chip readers as well as other payments processing products. In fact, iZettle just launched a new product that helps small businesses in building their own online stores.
Just a month ago, after the company announced its plans for an IPO, de Geer stated categorically that iZettle would not look a dual track process wherein they would consider selling the company as an alternative to an IPO. De Geer said that they spent the last one year trying to achieve an IPO.
However, he said, after he met the PayPal executive team, he changed his mind. He said that the team had been able to convince him that his company would continue to expand substantially.
In his interview with CNBC, de Geer stated that his company had been struggling to achieve its vision of helping small businesses and compete with the bigger tech companies out there, and this deal with PayPal would help them get close to that vision. He said that PayPal has a customer base of about 20 million merchants vis-à-vis the 500,000 that iZettle has.
Another thing that convinced him was that he felt the cultures of the two companies were aligned.
He also stated that it was important for people to know that the relationship between the two companies goes back some time. De Geer said that since the company was founded in 2010, they have been working with PayPal in various capacities.
According to the terms of the deal, de Geer will continue to lead iZettle even after the acquisition.
PayPal said that if all goes well, the deal is expected to be finalized in the third quarter of 2018. The company also stated that it was hoping to realize the advantages of this merger almost immediately. Financial benefits are expected to start showing after the deal is closed. Based on a joint statement made by the two companies, iZettle is expected to report a gross revenue of about $165 million this year. Additionally, about $6 billion worth of payments are expected to be processed through iZettle’s platform.