Join myFT Daily Digest to be the first to know about Fintech news.
Bills for home improvement projects can escalate rapidly. In the US, the settlement, like Home Depot, is the services of GreenSky, a credit provider that allows customers to pay off their purchase balance over time. Access to credit is not such an issue for Goldman Sachs, the Wall Street home that is trying to build a new wing.
Goldman announced on Wednesday that he would do so acquires fintech platform GreenSky. The purchase price of $ 2.2 billion implies a premium of more than 50 percent. But the Wall Street titan is paying in its own shares, which have risen 82% over the past two years.
Disruptors like GreenSky are struggling as public enterprises. Their technology and relationships make them a hot acquisition target for old financial service companies trying to keep up with consumer experiments in non-traditional financial institutions.
The irony of fintechs is that they are completely dependent on the incumbents they are trying to disrupt. GreenSky, which also offers loans for medical procedures, receives funding from funding partners such as Bank of Montreal. Its app performs the underwriting and the core of its revenue comes from transaction and service fees, with a total margin of about 8 percent. Operating expenses, coupled with the fractional credit risk it retains on loans, leave the business with a 5 percent contribution margin.
The transaction price is still less than half of the highest share price of GreenSky, which became known in 2018. The Goldman deal comes as both local banks like Truist and Regions and major payment companies, including Square and PayPal, have made major purchases. -of sale and ‘buy now, pay later’.
Goldman’s own consumer lender, Marcus, could now become a source of cheaper money for GreenSky. The broader question is how Goldman balances the acquisition of sites that are, in fact, taking the time to build their own mousetrap. With its own currency rising, it is an easy choice.
Lex recommends the FT’s Due Diligence newsletter, a compiled information session on the world of mergers and acquisitions. Click here to sign up
Sign up for our weekly newsletter for the latest news and views on fintech from the FT network of correspondents around the world. #fintechFT