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M&A Update

Authors: Edward Su VP of Education/Research, Harry McCourt Research Analyst, Ashley Huang Research Analyst

Visa acquires Plaid, a Fintech company specializing in connecting bank accounts to online applications.

Visa (NYSE: V) announced on January 13th their definitive agreement to acquire Plaid for a total of US$5.3bn in cash. Plaid serves as a way for consumers to connect their bank accounts from over 11,000 financial institutions to over 2,600 fintech developers. Some well known companies include the peer-to-peer money transfer app, Venmo, and the online brokerage, Robinhood, as well as other promising startups.

Plaid has received over $300mm since its inception in 2013, and as of the end of 2018, was valued at $2.65bn after a Series C funding round. Visa’s purchase price represents roughly a double in Plaid’s valuation over one year, which can be attributed to continued growth, as well as acquisitions Plaid has made to similar startups adding value to their operations. Visa’s stock price rose just over 6% in the 9 days after the acquisition announcement, and currently sits at a gain of just under 5%.

KKR Bidding on Viridor, a waste management specialist, for £4 Billion

The U.S. based private equity firm, KKR, has recently made a bid to purchase Viridor. Besides showing interest in Western Europe, KKR was among one of the groups that have previously invested in Asia to make profit out of the region-wide ongoing improvements on sanitation services.

Viridor is the bin collection and incinerator arm of water and waste management corporation, Pennon, with its business concentrated within the U.K. While analysts have previously valued Viridor between £3.0-3.8bn, Pennon Group was trading at all-time-high price on the London Stock Exchange, up by 8.6% in the morning following the announcement of KKR’s bid. The decision is still pending as other perspective buyout groups are in the process of evaluating the firm and making competitive offers.

The waste management sector has been a hotbed for investments due to its unique features. Demand shows a constant trend in higher income countries and significant growth potential in developing countries but they are heavily impacted by regulatory requirements.

Figure 1. Waste management market opportunity; costs of waste management by income group.

Firms in the industry tend to present steady, predictable long-term revenue streams and face less threat from competitors. As they are frequently considered “protected against economic shakes”, investors seeking lower volatility assets show more interest.