FinTech News
Capital One Set to Acquire FinTech Platform Brex
Capital One is looking to add another acquisition to the list as it’s made a deal to acquire a FinTech platform.
About Capital One’s Acquisition of Brex:
Recently, Capital One announced that it had reached a definitive agreement to acquire Brex. The deal is valued at $5.15 billion, which includes a mix of stock and cash. This transaction is subject to closing conditions, but is expected to be completed “in the middle” of this calendar year. As part of the deal, Brex founder and CEO Pedro Franceschi will continue to run the brand as part of Capital One.
Described as an “AI-native software platform offering intelligent financial solutions,” Brex is known for its corporate cards, expenses management, and payments capabilities. Since its founding in 2017, the firm has raised $1.7 billion in funding. It also gained headlines in 2022 when the FinTech announced that it was pivoting away from small business customers while emphasizing its software-as-a-service business.
The announcement of the Brex purchase comes after Capital One completed its acquisition of Discover Bank, with that deal closing in May of last year. While Discover still remains a mostly separate brand, Capital One has recently rolled out new debit cards that utilize the Discover network and, last week, new applications for Discover banking products were halted.
What They’re Saying:
Announcing the acquisition of Brex, Capital One founder, chairman, and CEO Richard D. Fairbank said, “Since our founding, we set out to build a payments company at the frontier of the technology revolution. Acquiring Brex accelerates this journey, especially in the business payments marketplace.” Fairbank added that Brex has “taken the rarest of journeys for a FinTech, building a vertically integrated platform from the bottom of the tech stack to the top.”
On the other end of the transaction, Franceschi stated, “We started Brex in 2017 as a category creator – bringing together financial services and software into one AI-native platform. Now we get to supercharge our next chapter in partnership with the team at Capital One. Together, we’ll maximize founder mode by combining Brex’s payments expertise and spend management software with Capital One’s massive scale, sophisticated underwriting, and compelling brand to accelerate growth and increase the speed at which we can offer better finance solutions to the millions of businesses in the U.S. mainstream economy.”
My Thoughts:
To be sure, $5.3 billion is a lot. However, looking back at Brex’s funding history, they reported a valuation of $12.3 billion in 2022 (amid a $300 million Series D-2 round). Thus, it seems as though Capital One is scooping them up on a downswing. Nevertheless, this is an interesting deal and I look forward to seeing how Brex operates under the Capital One umbrella.
Sidenote: I do wonder how quickly after closing Brex corporate cards might convert to using the Discover network. It’s all connected.
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