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One of the best scenes in John McTiernan's 1999 masterpiece, The Thomas Crown Affair, comes when the title character, a sexy corporate raider, decides to sell a subsidiary. Gathered in a conference room, shoppers scream and roar as Crown signs the papers.
"Thomas Crown, forced to sell something," says one. Another says, "So what do you think Crown, don't regret how you played that?"
Actor Pierce Brosnan in the role of the crown throws them a withering look and replies: “Regret is usually a waste of time, as is being happy. Did you find out what to say to your board when they find out you paid me thirty million more than others offered? "
In real life, M&A stars are likely to win just as often, but keep those thoughts to themselves.
So you have to wonder what Visa's M&A team was in for when they signed a deal last December to purchase Plaid for a whopping $ 5.3 billion, an astounding 50 times that of the annual turnover of Plaid. The plaid managers apparently wanted to impress their buyers with some details about their future strategy. As an installer for personal finance apps like Venmo and Acorns, Plaid has helped millions of consumers connect data from 11,000 banks. The next step was a new service that would allow consumers to make online payments directly from all of these bank accounts. It would be a lucrative foray into payments as the existing debit card-based market charged so high prices that the Plaid team mentioned a few times that they could be undercut by 50%.
Plaid had "described the service with the delight of someone who forgot we had a 70% stake," wrote a Visa manager after the meeting. Oops.
This overpriced market where consumers and online sellers face high prices? It is dominated by Visa. The Visa team therefore concluded that Plaid was a threat. One manager even drew a picture of a submerged island volcano to drive the point home. In just a few years, Plaid's new service could save up to $ 500 million a year from Visa's online debit payment revenue of $ 2 billion. "I don't want to be IBM for Microsoft," said the volcano artist.
Alfred Kelly, CEO of Visa, agreed and told CFO Vasant Prabhu that the expensive deal was an "insurance policy to protect our US debit business". In another letter, Kelly admitted that the deal was "not hunting for financial reasons," but for the company's "critical" debit market, "we must always do what it takes to protect this business." And since Plaid works with the top fintech startups, owning it would also give Visa a front row seat to uncover other potential threats.
But unlike Thomas Crown, Visa may not get away with it. On Thursday, the DOJ filed a lawsuit to block Visa from taking over Plaid. As you can tell from all of the quotes, it's full of smoking guns – or at least a smoking volcano. The tight 23-page complaint looks like an open case against a dominant company trying to block out a competitive threat.
Visa knew the lawsuit was coming, but their response didn't seem to reflect the evidence it contained. "Visa's business faces intense competition from a large number of players – but Plaid is not one of them," the company argued. As Thomas Crown might say, regret is a waste of time, as is mendacity.
This week, on the Fortune Brainstorm podcast, we examine the technology that is helping to fight COVID-19. Brian O’Keefe speaks to Nvidia's VP and General Manager of Healthcare. The A.I. In addition to fueling the search for a vaccine, platforms are developing therapeutics, COVID-19 tests, and more.
Then Michal Lev-Ram points out that even after discovering a vaccine, governments will have to figure out the logistics of distribution. In addition, there is an additional challenge to public skepticism about obtaining the vaccine. Lev-Ram speaks with Qualtrics President Zig Serafin about solving these issues. Listen to the episode here.