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Visa (V), Plaid Terminate Merger After Legal Complications

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Zacks Equity Research
·2 min read
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Visa Inc. V and fintech startup Plaid have called off their previously announced $5.3-billion merger after facing a legal challenge from the Department of Justice (DoJ). The said deal was announced on Jan 13, 2020.

Reasons Behind the Termination

Had the deal been successful, Visa would have bought Plaid’s data and the latter’s users would have lost control over the same.

Visa would have got its hands on sensitive data from hundreds of millions of people. The DOJ took this step in November 2020 to protect competition as well as individual privacy.

Strikingly, Visa’s management thinks that the combination of the companies would have been complementary and not competitive. Both companies cancelled the deal as they think that it would take time to settle.

The fintech market surged in 2020 and Plaid was no exception in benefiting from the same. The API (Application Programming Interface) startup witnessed a rise in demand for its services as more and more people were making transactions. Plaid’s wide array of network covers 11000 financial institutions across the United States, Canada, the UK and Europe.

This step by the DOJ doesn’t bode well for the overall fintech scenario, which in turn, could dampen the exit valuations of the fintech upstarts.
Nevertheless, Visa controls around 70% of the digital debit card payment market with Mastercard Incorporated MA being its only competitor. Several other measures, such as clauses in its agreements with banks, mergers and acquisitions, and technological innovations poise the payments giant well for growth. It is also gaining traction from its growing presence in the cryptocurrency space, courtesy of constant partnerships and technological upgrades.

Shares of this currently Zacks Rank #3 (Hold) company have gained 6.6% in a year compared with the industry’s growth of 2.6%.

Other companies in the same space, such as PayPal Holdings, Inc. PYPL and Square, Inc. SQ have also rallied 39% and 91.7%, respectively, in the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Mastercard Incorporated (MA) : Free Stock Analysis Report
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