Friday, April 10, 2015

A divorce between ebay and PayPal

Since 2002 when eBay acquired PayPal, at a price of $1.5 billion, the merger was successful. PayPal boasted more than 162 million active digital wallet users globally in 2014 and processed some $624 million in payments every day.

However, as more payment companies showed up in the payment market, bundle of two companies seems to be a disadvantage for both ebay and PayPal. They limited each other and start losing chances to corporate with other companies. For example, PayPal after divorce with ebay would be able to corporate with Amazon and Alibaba. Meanwhile, ebay could work with Apple pay and Google wallet.

 “As independent companies, we expect eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets,” according to the filing with the Securities and Exchange Commission. “EBay and PayPal also will benefit from additional flexibility and agility to pursue new market and partnership opportunities.”

The arrangement would increase both companies’ competitive power by remaining independent of each other but excluding prohibition on each working with the other’s core competitors.

Like real divorce, if PayPal’s share of the transactions falls below that level, eBay must pay its former subsidiary restitution. The deal will last for six years, including a one-year transition period.

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