Very quiet partner
Very little is being said about Block (formerly Square) contributing equity as part of the proposed Stripe/Advent/Block deal to buy PayPal for $53B. Most outlets are just reporting Stripe/Advent, although CNBC does mention Block as part of the equity deal. Even CNBC keeps Block out of the headline and simply says:
Stripe, Advent and Block are contributing $17 billion in equity for the offer.
There is no other mention of Block in the article or in most reporting. The positioning is deliberate. Industry consortium tries to buy PayPal seems harder to digest—who and why and how?—than Stripe + PE money tries to buy PayPal. Stripe + PE money is how the deal is very clearly being presented and discussed. If Block is prominently presented in the deal, the buyer becomes an industry consortium.
Advent owns or has owned Worldpay, Vantiv, Mangopay, Circle/myPOS, and Thredd, which are all in the payments and processing space.1 So Advent is quite a bit more entrenched in the area than simply supplying Stripe with capital in the deal. Advent has a thesis and has been building in the space with conviction for over a decade. Advent has experience getting into and out of assets in the space. This is helpful messaging for Stripe’s shareholders—that Advent can be bought out in the future when they’d like.
Naturally, most business audiences are skeptical of more complicated mergers. We are all fresh off of watching the Comcast NBCUniversal unbundling, which itself was the product of a complicated merger. The original Comcast NBCUniversal deal happened over a decade ago and involved a two-stage buyout of a financial investor (GE). Regulators, too, can be more critical of an industry consortium.
The simpler the deal seems, the more investor pressure on the board to accept it. This undoubtedly hampered Ryan Cohen’s elaborate job application when he approached eBay on behalf of GameStop.
Here Block took the very junior partner position of not being mentioned much at all in the deal even though, presumably, they are a big part. Venmo (part of PayPal) is competitive with Cash App so the deal is squarely in their strategic focus. We don’t know how much Block is putting into the deal. We can guess that it’s not nothing, because the other partners wouldn’t be amenable to them simply tagging along for giggles, given that Block’s presence would certainly not de-risk the antitrust look that the deal will get.
The parties all know what they are doing here, so it’s reasonable to read into every aspect of the deal. It started with rumors back in February and has been a coordinated effort since. The leaks to the press are packaged and deliberate. It’s an industry consortium making a play here—the buyers have patience and money.2
Unless, of course, PayPal’s board finds humor in asking for the cash via a PayPal account. The board, as PayPal routinely does to merchants, would then have the ability to freeze the funds for 180 days.3