Stripe and private equity giant Advent International are part of a group in talks to acquire PayPal, it’s been reported. If it goes ahead, it’s a deal that could reshape the global payments market and have significant implications for Australian merchants and retailers.

The group reportedly initially offered US$60.50 per PayPal share, valuing the payments company at more than US$53 billion. PayPal initially rejected the proposal as too low, but according to reports from The Wall Street Journal negotiations have now continued over a potentially higher offer.

The talks come after PayPal’s market value fell dramatically from its pandemic-era peak. The company was valued at more than US$280 billion in 2021, but its market capitalisation had fallen to around US$40 billion before the takeover approach.

PayPal is now attempting to turn the business around under CEO Enrique Lores, who took over in March. The strategy includes cost reductions, organisational changes and greater use of AI. The company continues to operate major businesses including Venmo, Braintree, its debit card operation and buy-now-pay-later services.

Australian impact

With both companies having established positions in Australia, the potential acquisition is relevant to the local digital payments landscape. 

Both compete for merchants, ecommerce operators and online checkout numbers.

If successful, the acquisition could bring together Stripe’s merchant infrastructure with PayPal’s large consumer-facing payments network.

For Australian retailers and ecommerce operators, the biggest questions would centre on pricing, competition and how to integrate their product offerings.

A combined business could not only potentially offer merchants more in terms of payment processing, checkout, fraud prevention and financial services, it could also strengthen Stripe’s ability to compete against banks and other payment platforms in Australia.

Bringing the two together could therefore change the dynamics of online checkout, particularly for those merchants that currently use Stripe for processing but also offer PayPal as a separate option.

PayPal wants more

The original US$60.50 proposal represented a significant premium to PayPal’s share price, but the company’s board reportedly believes it could command a higher figure. 

PayPal shares have since traded above the initial offer price, reflecting investor expectations that a higher bid could emerge.

That leaves the parties with a potentially significant valuation gap to bridge.

For Stripe, acquiring PayPal would represent a major expansion of its consumer payments reach, and for Advent, the addition of Paypal would make it one of the largest tech and payments transactions in its portfolio. 

As for PayPal, if the sale goes through it would mean a dramatic change in ownership for a company well known as one of the world’s biggest digital payments brands, but also following years of declining market value and pressure for fintech competition. 

No agreement has been reached and the talks could still collapse.