This document describes the acquisition of mobile payment software company Square Inc. by Google. The mobile payment industry is one of the fastest growing industries today, with transactions up 60% from last year. Square has established itself as an industry leader within the US, with sales of $110 billion last year. This acquisition would help position Google to capture a significant piece of the estimated $240 billion industry, and Square would strengthen Google’s Wallet division by introducing related technology that could run on more than just Sprint’s limited network. In our report we will complete a SWOT analysis for making this acquisition and look at competitors within the mobile payment industry to both Google Wallet and Square. Our two business valuations using discounted cash flows of Intuit’s GoPay segment, and a relative valuation of Square to the mobile application industry based on revenues gave us similar figures of $1.65, and $1.619 billion dollars. Given these figures, we conclude the highest price Google will pay for Square is $2 billion dollars. Given Google’s large $49 billion cash on hand, and proven track record of having acquired 109 companies, Google has the capabilities managerialy and financially to succesfully complete this acquisition. This would be a friendly takeover if carried through, with a timeline of events for the acquisition listed below. Section 1.02
Mobile Payment Industry
Mobile payment generally refers to payment services managed or executed using mobile devices. The demand for mobile credit card management has accelerated rapidly. The mobile payment industry is expected to collect over $171.5 billion in transactions this year, a 60% rise from 2011. The overall industry players can be broken into three separate categories based on focus: on-line payment services, digital wallet consolidation, and mobile point-of-sale (POS) credit card processing.
Square has quickly become one of the most widely used services in the industry. They have decided to entice users by focusing on the POS payment processing. The mobile credit card processor intends to leverage the proliferation of the smart phones over the last several years to standardize the technology to make and process payments. It allows users to scan credit cards using a device plugged into their smart phone in order to receive payments from customers, clients, friends, or family members. After a new customer signs up online for free, Square ships the small square plug-in at no cost. As of May 2011, 500,000 readers have been shipped. For a fee of 2.75% per transaction, users are able to facilitate large or small payments right from the palm of their hands. The merchant can receive payments by either swiping the card through the reader or entering the credit card details manually into the app. The merchant can also record cash transactions using the app, rendering it an accounting and inventory management solution. More recently, Square has tried to consolidate the digital wallet by releasing another app that allows consumers to pay at establishments using their register technology. In other words, one can receive and disburse money anywhere without bringing their wallets with them. Section 1.04
Square’s biggest competitors are Intuit, Isis, PayPal and PayAnywhere. All of these provide products that enable on the go credit card payments with additional features depending on the company. With different transaction fees, monthly plans, and features, these four companies compete with Square in trying to gain the biggest market share. (a)
Intuit is a public software company that primarily caters to small businesses and individuals with its tax preparation technology. It has just come out with a credit card processing application, GoPayment, which allows for quick and simple payments. The application is very similar to Square but it offers two...
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