Tag: m&a

  • Will Stripe buy PayPal?

    Will Stripe buy PayPal?

    A Bloomberg report about a possible Stripe acquisition of PayPal has spurred intense discussion in the fintech industry. After all, Stripe is the digital payment colossus of 2026, the most valuable private fintech firm in the world. PayPal once dominated the online payment processing market, but not anymore.

    Any conversation about the digital payments pioneer being acquired or broken up should start with what went wrong at the Peter Thiel-founded company. PayPal has struggled with declining stock value, missing growth targets, and intense competition from rivals like Apple and Google. Its share price has fallen from a high of US$300 in 2021 to just US$40. Its push into AI seems reactive.  

    The former digital payments hegemon lost its edge by continuing to focus on payment volume and card processing over product innovation even after digital payments became commoditized. Flagship Advisory Partners notes, “There was real friction in digital payments until the last ten or so years, but today nearly every bank app in North America and Europe (PayPal’s core markets) has built-in person-to-person payment capabilities… Merchants no longer rely on PayPal to drive conversion through ease of payments.”

    The payment giant’s travails explain why Alex Chriss only lasted 1 ½ years in the CEO job. David Marcus, who served as the firm’s president from 2012 to 2014, said on X that Chriss—whose background is in software rather than payments—erred by removing much of PayPal’s leadership team with a deep understanding of payments. Marcus does not express confidence in Chriss’s replacement either, noting that new PayPal CEO Enrico Lores is a hardware executive (he formally served as HP president).

    While PayPal has lost its competitive edge, it remains a profitable company with an enormous consumer user network of roughly 400 million active accounts. For Stripe, whose core strength lies in B2B payments, merging with PayPal would allow it to control the entire payment stack—from backend processing to the consumer “pay” button—while diversifying away from reliance on partners like Shopify. A combination would create a closed-loop system, connecting Stripe’s merchant base directly with PayPal’s user base, potentially reducing reliance on traditional, high-fee card networks.

    The implications for the payments industry would be significant, combining the largest fintech payments infrastructure provider and consumer brand. It would likely catalyze more consolidation and reduce the number of large independent payment processors. Further, a combined Stripe-PayPal entity would control massive troves of data on both the merchant acquiring and consumer sides.

    And for these reasons (and others), we doubt that this deal could clear all the necessary regulatory hurdles in the United States and Europe.

    In the meantime, PayPal and Stripe are not currently in sale talks, according to Semafor. While Stripe has expressed interest in PayPal’s assets, the company is focusing on operational execution and preparing for potential activist investor campaigns rather than an acquisition.

    Semafor makes a good point that has not come up in many other analyses about the hurdles facing this deal. It is not easy for privately held companies, especially those the size of Stripe, to buy a large public company if it does not want to be bought. “Stripe cannot pay with its own shares and would need rock-solid debt commitments to rebut any stiff-arm from PayPal,” Semafor notes.

    For now, we’re going to put this Stripe-PayPal deal in the same bucket as several other larger-than-life fintech mergers that never came to fruition. Visa’s abortive bid for Plaid comes to mind. In that case, the Department of Justice sued to block the merger, arguing that Visa was acquiring a nascent competitive threat to its payments monopoly. Another failed deal worthy of mention – even though it is not strictly fintech – is Grab/GoTo.

    Some mergers were just not meant to be.

  • Starling Bank mulls next big steps

    Starling Bank mulls next big steps

    Technology forward with a lean cost structure and known for being customer centric, Starling Bank is one of the most successful UK digital lenders. It has operated as a licensed bank in the U.K. since 2018 with shareholders that include Goldman Sachs, Fidelity Investments and the Qatar Investment Authority. 

    In the fiscal year ended March 31, 2025, Starling Bank posted a profit of US$301.9 million on revenue of US$963.4 million.While that is an enviable performance by the standard of most fintech startups, for Starling Bank it was a bit of a disappointment. The company’s net income fell 26% annually because of a Covid-era business loan fraud issue and a regulatory fine over financial crime failings. Revenue grew 5%, but that was a significant slowdown from the 50% expansion rate in Starling’s 2024 fiscal year.

    Never as audacious as competitors like Revolut and, to a lesser degree, Monzo, Starling still faces the reality of being an 11-year-old fintech startup long past the go-go days in private markets. Investors want Starling Bank to show them the exit ramp—and for this reason, the company has reportedly engaged investment banks, including Morgan Stanley and Rothschild, to explore options for a sale, targeting a potential valuation of up to £4 billion.

    Though Starling Bank is a UK company whose largest business is in its home market, we would not be surprised if it were to eschew the London Stock Exchange (LSE) and instead go public in the United States. To be sure, a New York Stock Exchange (NYSE) listing—which we consider the likeliest destination for the offering—would signal a change in direction from what former interim CEO John Mountain said in 2024. At the time, Mountain said that London was the “natural home” for Starling, and he even emphasized that the company was not “considering other markets” for its market debut.

    That was then. Now, Starling Bank is leaning towards a U.S. listing. The UK digital lender’s CFO, Declan Ferguson, told the Financial Times in July that while no decision had been made on where the bank would list, it was a U.S. IPO. “We continue to observe what is happening externally with our peers and also what is happening on the global stage in terms of the UK versus US [stock markets],” he said.

    One reason for Starling Bank to go public in the U.S. would be to achieve a higher valuation than it could on the LSE. The U.S. IPO market benefits from bigger size, greater investor sophistication regarding technology stocks, and higher valuation multiples. UK fintechs often feel they are valued more like traditional banks in London, whereas in the U.S., they might be valued as high-growth technology platforms.

    At the same time, the U.S. has a much larger financial services market than the UK that, despite its fragmented nature, offers Starling significant opportunities. Starling’s management reckons that its cloud-native technology platform (Engine) could be a key differentiator in the massive U.S. banking market, especially when it comes to its thousands of mid-tier and community banks.

    To that end, Starling is also likely to expand in the U.S. prior to its IPO and has reportedly looked at acquiring a U.S. bank. If the UK digital lender can acquire a traditional U.S. bank, it will avoid the regulatory morass that would be guaranteed if it independently applied for a U.S. banking license. Further, an acquisition would give Starling Bank instant infrastructure and deposits in the American market, as well as an immediate opportunity to deploy Engine.

    If the UK neobank finds an attractive M&A target, we expect it would move to make the deal in the first half of 2026 and help pave the way for an NYSE IPO, perhaps in the second half of the year.

  • Why Mizuho took a majority stake in India’s Avendus

    Why Mizuho took a majority stake in India’s Avendus

    Japan’s financial heavyweights like Mizuho, MUFG and Sumitomo Mitsui are increasingly looking for more promising banking opportunities overseas as growth in their home market is flat given a legacy of ultra-low interest rates, deflation, heavy corporate cash holdings stifling investment, and a shrinking population.

    India has emerged as a preferred market for Japanese financial firms. The subcontinent boasts strong economic fundamentals, a young and large population with rising incomes, rapid digital adoption, and a burgeoning fintech sector. At the same time, to attract needed capital and international financial expertise, Indian regulators have loosened some restrictions on foreign investment.

    It is against this backdrop that Japan’s Mizuho Securities—which is part of the third-largest banking group in Japan, Mizuho Financial Group—recently announced its intention to buy 61.6% to 78.3% of shares in KKR-backed Indian investment bank Avendus for up to 81 billion yen (US$523 million). KKR affiliate Redpoint Investments Pte Ltd. is selling the stake to Mizuho Securities. Ranu Vohra, co-founder and executive vice chairman of Avendus, will also be liquidating his stake as part of the deal.

    Following the closing of the deal, which is expected in July 2026, Gaurav Deepak and Kaushal Aggarwal will continue to lead Avendus. “Together, we look forward to bringing innovative capital solutions to the Indian ecosystem and leveraging our complementary strengths to create deeper financial and economic flows between India and Japan,” Deepak said in a statement.

    For his part, Aggarwal said, “With India entering a transformative economic phase, we see immense potential to scale with purpose, innovate across sectors, and build a platform that consistently delivers impact in India and beyond.”

    The successful tie-up comes after Mizuho’s efforts to buy a majority stake in Avendus previously hit a roadblock. In September, India’s Economic Times reported that talks hit a snag due to disagreements on valuation and the right exit option for the KKR portfolio company.

    Mizuho emerged as the frontrunner for KKR’s 63% stake in Avendus, which valued the firm at about $800 million, according to Bloomberg. Other bidders for Avendus included Nomura Holdings Inc. and Carlyle Group Inc.

    The Mizuho-Avendus tie-up is the second major investment the Japanese lender has made in an Indian entity since early 2024. The first involved Mizuho taking a 15% stake in the non-banking financial company Credit Saison (CS) India with an investment of US$145 million. CS India subsequently secured External Commercial Borrowing (ECB) funding of US$145 million from Mizuho. The equity stake marked Mizuho Bank’s strategic entry into the Indian market.

    The Avendus deal follows Sumitomo Mitsui Financial Group’s purchase in September of a 20% stake in Yes Bank for about 135 billion rupees (US$1.6 billion) from State Bank of India (SBI). This strategic investment provides capital for Yes Bank and an exit for SBI from its 2020 rescue role. SMBC aims to support Yes Bank’s growth and transformation, benefiting from global expertise, while Yes Bank gains a strategic partner. SBI’s stake decreased to around 10%, and other original investors also reduced their holdings, allowing SMBC to become the largest shareholder.

    The infusion of capital and global banking expertise is crucial for Yes Bank’s continued recovery and growth after its 2020 financial crisis, while offering SBI a profitable exit for its investment.

    Looking ahead, we expect that heavyweight Japanese banks will continue looking for Indian investment opportunities in 2026 and beyond. Overseas expansion has become essential for Japanese megabanks to achieve scale and higher returns unavailable domestically.

    Among emerging markets, India stands out for Japanese lenders. The subcontinent’s expanding middle class and policy emphasis on financial inclusion create sustained demand for credit across retail, MSME, and corporate segments that will make its financial sector attractive for Japan’s largest financial groups for years to come.