Quadpay Acquisition: Key Details, Impact, and What Comes Next

Zip's acquisition of Quadpay marks a significant milestone in the Buy Now, Pay Later (BNPL) industry. This strategic move aims to enhance Zip's market presence in the United States, positioning it to compete more effectively with established players. The merger is expected to drive innovation and expand the customer base, solidifying Zip's role as a global BNPL leader.

What Is Quadpay?

Quadpay, founded in 2017, offers a "Buy Now, Pay Later" service that allows customers to split their purchases into four interest-free installments. This service can be utilized both online and in physical stores, providing flexibility and convenience to shoppers. A key differentiator for Quadpay is its seamless integration with various retailers, making it a versatile option for consumers looking to manage their finances more effectively.

Who Acquired Quadpay?

Zip operates as a financial technology company specializing in "Buy Now, Pay Later" (BNPL) services. This service allows consumers to make purchases and defer payments over a period, either online or in physical stores. As a significant player in the BNPL market, Zip's broad acceptance and integration with various retailers highlight its strong market presence and influence in the consumer finance sector.

When Was Quadpay Acquired?

Zip acquired Quadpay on June 2, 2020. This acquisition came at a time when the Buy Now, Pay Later (BNPL) industry was experiencing rapid growth, driven by increasing consumer demand for flexible payment options. The move allowed Zip to expand its footprint in the United States, positioning itself to compete with major players like Afterpay. The timing also aligned with a broader trend of fintech companies forming strategic partnerships to enhance their market presence and technological capabilities.

Why Was Quadpay Acquired?

• Market Expansion: The acquisition of Quadpay allows Zip to significantly grow its presence in the North American BNPL market. With this move, Zip now operates in five countries, including the US, UK, Australia, New Zealand, and South Africa, expanding its reach to over 3.5 million customers and 26,000 merchant partners worldwide.
• Technology Integration: Quadpay's innovative use of virtual-card technology, in partnership with Stripe, enhances Zip's technological capabilities. The integration of Quadpay's technology stack, which is built on the same code base as Zip, ensures proven portability and scalability, allowing for accelerated product development and seamless integration with merchants.
• Competitive Advantage: By acquiring Quadpay, Zip strengthens its position against competitors like Afterpay. The merger creates a unified global brand, enhancing market presence and brand recognition. Additionally, Quadpay's high customer approval rates and significant increases in conversion rates and average order values for merchants provide Zip with a competitive edge in the BNPL market.

Acquisition Terms

• Acquisition Price: The acquisition was valued at $400 million.
• Payment Method: The transaction was an all-scrip deal, meaning it was settled entirely by the issue of Zip ordinary shares.
• Key Conditions or Agreements:
  • Shareholder Approval: Zip shareholder approval was required for the purposes of ASX Listing Rules and the Corporations Act 2001 (Cth).
  • US Antitrust Clearance: Receipt of US antitrust clearance was necessary.
  • No Material Adverse Event: No material adverse event should have occurred in respect of QuadPay prior to completion.
  • Appraisal Rights: QuadPay stockholders should not exercise their appraisal rights under Delaware law for more than 5% of the outstanding shares of QuadPay.
  • Voluntary Escrow Agreements: QuadPay stockholders holding at least 90% of the outstanding shares of QuadPay must enter into voluntary escrow agreements.
  • Convertible Notes and Warrants: Terms included a $100 million convertible note with a 5-year tenor and a fixed coupon, and up to $100 million in warrants with a 3-year exercise period.
  • Retention Equity: Up to 5 million shares in Zip Co delivered for tenure and up to $60 million delivered in cash or stock linked to TTV performance targets for QuadPay founders.

Impact on Quadpay

The acquisition of Quadpay by Zip has led to significant changes in operations and management. The merger has unified the brands under a single global identity, bringing together over 300 finance technology product experts and more than 200 technical resources. Quadpay's founders, Adam Ezra and Brad Lindenberg, have joined Zip's global leadership team, focusing on driving growth in North America. This strategic move has expanded Zip's operations to five countries, enhancing its global footprint and market presence.

In terms of product offerings, the merger has allowed Zip to integrate Quadpay's innovative virtual card technology, enabling consumers to shop and pay in installments anywhere Visa is accepted. The combined entity continues to offer flexible payment options, splitting purchases into four interest-free installments. Employee reactions have been positive, with retention equity offered to ensure alignment and drive growth. Customers have also responded favorably, appreciating the enhanced services and broader merchant network. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly and efficiently.