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SHAKE MY HAND
Someone put their deal sleds on yesterday.
SoFi is throwing down $1.2B to buy Galileo. The Italian astronomer? Nope, the payment software company you’ve probably never heard of that’s been around since 2000.
The deal is a cash and stock transaction that includes $75M in cash, $250M in debt, and the remaining $875M in stock.
So, to clarify, not the astronomer?
No, no telescopes were acquired in the making of this transaction. Galileo utilizes application programming interface software (APIs) to connect banks to credit card processors. For the non-virgins out there, APIs allow two machines to talk to each other, like a server communicating with a cloud app. Or, used in a sentence...
Chad to a girl at a bar: "Yea, it's a small batch API play."
Many of the companies that Galileo partners with, such as Robinhood and Chime, are actually SoFi’s competition. But Galileo’s CEO, Clay Wilkes, assured everyone that the companies will operate independently, and there certainly won't be any funny business or trade secrets thrown over the firewall.
The CEOs of both companies ensured investors that both should benefit, as the deal will help the companies launch new products, expand further outside the states, allow for synergies... and presumably provide SoFi with Robinhood's intellectual property.
The bottom line...
With the M&A pipeline drier than a single person's sex life during quarantine, the deal was unexpected to say the least.
Potential deals have largely come to a standstill thanks to corona boi. In fact, US annouced deal volume in Q1 dropped 51% from a year earlier. Companies are preparing for a downturn and cutting costs as more than 12k startups have laid off employees in the past month. Doesn’t exactly scream ‘let’s make a deal’, does it?
With that said, 2020 has been the year of the fintech mega-deal. In January Visa bought plaid for $5.3B and in February Intuit scooped up Credit Karma for $7.1B. And it's safe to assume Galileo and SoFi started getting hot and heavy when coronavirus was just a measly epidemic.
SoFi to acquire payment software company Galileo for $1.2 billion [CNBC]
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