The nit in Square’s acquisition of Afterpay

Square’s $29 billion acquisition of buy-now-pay-later company Afterpay makes a whole lot of sense.

Because making four $75 payments is easier to stomach than one big $300 cut in the wallet, companies offering such installment plans entered hyperdrive over the course of the pandemic. While buy-now-play-later is nothing new, it has gained traction more recently especially among younger consumers as it focuses on breaking up smaller receipts in the hundreds rather than those in the thousands. Klarna for instance now commands a $46 billion valuation, making it the fourth most valuable unicorn in the world, according to CBInsights.

In that context, the Jack Dorsey-led company’s decision to spend its largest acquisition check yet is one driven by foresight: Dorsey effectively putting his dollars down on the next generation. He is betting that Millennial and Generation Z consumers will continue to choose buy-now-pay-later options over traditional credit cards—and that merchants will find enough business to be had via installment plans that it will attract new and keep old sellers with Square.

“Together, we can better connect our Cash App and Seller ecosystems to deliver even more compelling products and services for merchants and consumers,” Dorsey, the co-founder and CEO of Square said in a statement.  

But Square is certainly far from alone in the space. As Clubhouse unleashed a live-voice race among social media incumbents, then buy-now-pay-later companies in the form of Klarna, Quadpay, and Affirm have done the same to the financial services space. Before Square’s acquisition, PayPal launched its own installment program in late August while Goldman Sachs and Apple together are said to be developing a service of their own.

That also means that, while the tie-up makes sense for Square, the Afterpay deal is also an extremely pricey bet in an extremely competitive space. Though the Australian company’s revenue grew 115% in 2020 to $494.72 million, Afterpay has yet to post a profit. Piper Sandler analyst Christopher Donat released a note Monday saying while he believes the deal opens doors for Square, he is “less enthusiastic” about the price of the all-stock deal. 

Only time will tell if the price tag will be worth it—but for the time being, that surge in competition is leading many to believe that the tie-up could lead to greater consolidation in the space. 

And as the space grows in dollar amounts, certainly it will bring further regulatory scrutiny too. U.K. Officials for instance have already moved to put more guide rails on the industry. 

THE WORLD, IN CONTEXT: Coins2Day is out of the gates with the world’s biggest companies by revenue. While 2020 was defined as the year that much of the world went digital, the most well represented industries on the list are still largely not tech companies. The industries with the most companies were insurance (54), banks (49), followed by automakers and parts’ companies (33), and petroleum refiners (24). Read more.

APPLE SAID NO TO MUSK: On Twitter Friday, Tesla CEO Elon Musk said while he tried to meet with Apple CEO Tim Cook about the tech giant potentially acquiring his electric car company when it was worth about 6% of today’s value, Cook “refused to meet.” 

Lucinda Shen
Twitter: @shenlucinda
Email:  [email protected]

Jessica Mathews compiled the IPO and SPAC sections of this newsletter.

VENTURE DEALS

- Unacademy, an Indian edtech, raised $440 million. Temasek led the round and was joined by investors including Mirae Asset, SoftBank Vision Fund 2, General Atlantic, Tiger Global, Zomato co-founder Deepinder Goyal, and Oyo founder Ritesh Agarwal.

- Modern Animal, a Los Angeles-based veterinary company, raised $75.5 million in funding. It raised $35.5 million in Series A funding led by True Ventures and Addition and a $40 million Series B led by Founders Fund.

- Zentera Therapeutics, a Shanghai-based biopharmaceutical company, raised $75 million in Series B funding. OrbiMed Advisors Asia and Tybourne Capital Management led the round and were joined by investors including Avidity Partners, Casdin Capital, and Surveyor Capital.

- Prime Trust, a San Francisco-based maker of fintech infrastructure, raised $64 million in Series A funding. Mercato Partners led the round and was joined by investors including Samsung Next, Nationwide, Commerce Ventures, Ayon Capital, Kraken Ventures, STCAP, s20 Capital, Seven Peaks Ventures, Diverse Angels, University Growth Fund, and Nevcaut Ventures.

- MoEngage, a San Francisco-based customer management platform, raised $32.5 million. Multiples Alternate Asset Management led the round and was joined by investors including Eight Roads Ventures, F-Prime Capital, and Matrix Partners.

- Mixlab, a New York City-based pet pharmacy, raised $20 million. Sonoma Brands led the round and was joined by investors including Global Founders Capital, Monogram Capital, Lakehouse Ventures, and Brand Foundry.

- Yaydoo, a Mexico City-based B2B software and payments company, raised $20.4 million in Series A funding. Base10 Partners and monashees led the round and were joined by investors including SoftBank’s Latin America Fund and Leap Global Partners.

- Talview, a San Mateo, Calif.-based hiring and proctoring tech maker, raised $15 million in Series B funding. Eileses Capital led the round and was joined by investors including Storm Ventures, Inventus Capital, and Emergent Ventures. 

- Catch, a New York City-based benefits platform for independent workers, raised $12 million in Series A funding. Crosslink Capital led the round and was joined by investors including Khosla Ventures, Kindred Ventures, Nyca Partners, and Urban Innovation Fund. 

- DoNotPay, a San Francisco-based robot lawyer company, raised $10 million in Series B funding. Investors included a16z, Lux Capital, Tribe, and Day One.

- Trading.TV, a New York City-based social livestreaming platform for traders and financial content creators, raised $6.1 million in seed funding. Investors included L Catterton Growth, Activant, Navy Capital, and Tribe Capital.

- Juno Medical, a New York City-based doctor's office, raised $5.4 million in seed funding. Vast Ventures led the round and was joined by investors including Atento Capital, Company Ventures, humbition, RareBreed Ventures, and Lafayette Square.

- Revel, a San Francisco-based community for middle-aged women, raised $3.5 million in seed funding. August Capital led the round. It also acquired Woolfer, a community for those over 40.

PRIVATE EQUITY

- H.I.G. Capital will acquire a number of Quick fast food outlets from Burger King France for 240 million euros ($285 million).

- A&R Logistics, backed by Wind Point Partners,acquired RJ's Transportation, a Port Allen, La.-based provider of bulk liquid transportation and other logistics services. Financial terms weren't disclosed.

- Blue Venture Fund invested in B luestone Physician Service, a portfolio company of WindRose Health Investors. Financial terms weren't disclosed.

- Bridgepoint invested in ACT, an Amsterdam-based provider of carbon reduction solutions. Financial terms weren't disclosed.

- Genstar Capital reinvested in Association Member Benefits Advisors, an Austin-based membership and marketing insurance agency. Financial terms weren't disclosed.

- Gryphon Investors acquired Wittichen Supply Company, a Birmingham, Al.-based wholesale distributor of heating, ventilation, and air conditioning equipment and parts.

- MidOcean Partners acquired Louisiana Fish Fry, a Baton Rouge, La.-based maker of Louisiana-inspired food products. Financial terms weren't disclosed.

- OMERS Infrastructure (37.5%), Goldman Sachs Asset Management (37.5%)  and AXA IM Alts (25%) agreed to acquire amedes Group, a provider of medical diagnostics services in Germany, Belgium, and Austria, from Antin Infrastructure Partners.

OTHER

- Parker-Hannifin (NYSE: PH) agreed to buy Meggitt, a U.K.-based aerospace and defense business, for 6.3 billion pounds ($8.8 billion) in cash.

- Santos will acquire Oil Search, an Australian oil and gas company, in a deal that will value the latter at $16 billion.

- Vonovia is seeking to acquire Deutsche Wohnen, a German real estate company, with a new bid valuing the latter at €19.1 billion ($22.7 billion).

- Keppel plans to acquire the property assets of Singapore Press Holdings, a newspaper publisher in the country, for S$2.2 billion ($1.7 billion).

- An affiliate of Qatar Investment Authority invested $200 million in Airtel Mobile Commerce BV, the mobile money business of telecom Airtel Africa. Financial terms weren't disclosed.

IPO

- Adagio Therapeutics, Inc., a Waltham, Mass.-based company looking to treat COVID, plans to raise up to $318.6 million in an offering of 17.7 million shares priced between $16 and $18 per share. The company reported a net loss of $65.3 million in 2020 and has yet to post revenue. Fidelity Investments, Mithril, and GV back the firm.

- Eliem Therapeutics, a Redmond, Wash.-based nervous system-focused  biotech company, plans to raise up to $85.5 million in an offering of 4.5 million shares priced between $17 and $19 per share. The company reported a loss of $20.7 million in 2020 and has yet to post revenue. RA Capital and LifeArc back the firm.

- Policybazaar, an Indian digital insurance marketplace company, filed for an initial public offering in the country, according to Bloomberg. The firm is backed by SoftBank, Tiger Global Management and Tencent Holdings.

F+FS

- CVC Capital Partners is nearing a deal to acquire Glendower Capital, a U.K.-based secondaries buyout investment firm, per Bloomberg.

- BoxGroup, a New York City-based early-stage investor, raised $255 million for two new funds: BoxGroup Five and BoxGroup Strive with $127.5 million each.

PEOPLE

- BoxGroup, a New York City-based early-stage investor, named Greg Rosen as a partner. He was previously at Bedrock.