The great fintech consolidation of 2020 continues. While we knew this deal might be coming, as it was leaked last week, today they made it official. Kabbage is being acquired by American Express for an undisclosed sum, although last week the rumor was that it would be “up to $850 million.”
In a letter the founders of Kabbage, Rob Frohwein and Kathryn Petralia, shared today they had this to say about the deal:
Although this is our first time sitting in the seat of the entrepreneurs selling their “baby,” we are certain it’s not uncommon to have a bittersweet feeling. On the one hand, we are entrepreneurs through and through and relish the daily fight that is required to push a company forward (not to mention through a pandemic). On the other hand, we are not joining just any company, but a company we have long admired that shares our vision to strengthen small businesses.
Importantly, we’re integrating with an incredible team. We’ve known Anna Marrs, the spectacular and authentic leader of the Global Commercial Services division of American Express, long before we started this particular conversation. The same goes for Steve Squeri, the CEO of American Express, who is not just a widely respected CEO but a genuinely nice, down to earth guy. We are joining an illustrious company of exceptional people and that is what makes us so excited about this transaction.
Kabbage has expanded beyond lending in recent years with the launch of Kabbage Payments, Kabbage Insights and just last month Kabbage Checking. They now have a chance to integrate these offerings into the vast Amex empire.
Interestingly, according to the press release AmEx will acquire the technology, people and data of Kabbage, but not its loan book. Given the state of small business today and the uncertainty over the potential outcome of the loans AmEx is taking that potential downside risk off the table.
Anna Marrs, President of Global Commercial Services at American Express, said this in an official statement:
This acquisition accelerates our plans to offer U.S. small businesses an easy and efficient way to manage their payments and cash flow digitally in one place, which is more critical than ever in today’s environment. By bringing together Kabbage’s innovative technology and talented team with our broad distribution capabilities and over 60 years of experience backing small businesses, we can better help our customers successfully emerge from this challenging period and beyond.
I reached out to Kabbage with some questions and I include their emailed responses below:
- When did conversations first start on the acquisition talks?
Kathryn Petralia, Kabbage: We’ve had the pleasure to get to know Anna Marrs and Steve Squeri over the past several years which over time led to this transaction. - Will the Kabbage brand be maintained long term?
AmEx Spokesperson: There are still details we need to sort through between now and closing, and again between closing and launch, but we’re certainly excited to build a great brand together for small business customers. - Any change to the Kabbage product road map in the short term? For example, will the Kabbage Checking offering still launch as is? What will happen to Kabbage Insights?
AmEx Spokesperson: Nothing changes at this time. In the transaction, American Express is acquiring Kabbage’s full digital cash-flow platform, inclusive of all its current technology and IP. We see great opportunity to build upon what they’ve already created, not diminish it. - What are some of the things on the Kabbage wish list that might now be possible with this acquisition?
Kathryn Petralia, Kabbage: Our wish list and vision stay the same—to build a world-class cash flow management platform for small businesses. Joining American Express only accelerates our path to get there. - How does AmEx intend to use the tech that Kabbage has built?
AmEx Spokesperson: We’re also excited to accelerate American Express’ mission to bring small businesses easier payments, working capital and cash flow management solutions, together into one digital platform. What’s so exciting about this deal is the potential for our shared vision to build impactful solutions for small businesses.
My Take
This is probably not the exit that Rob and Kathryn expected when they closed their Series F in 2017 raising $250 million from Softbank at a valuation that was “between $1.25 billion and $2 billion.” But given the current environment and the fire sale OnDeck acquisition this was a good result for them, their employees and shareholders.
There is probably no stronger brand in small business finance than American Express and so it is understandable that they are excited about this transaction. How and when they fully integrate Kabbage into AmEx with rebranded offerings remains to be seen. While I could see them maintaining the Kabbage brand for some time post transaction you have to think that everything will come under the AmEx brand in the not too distant future.
What is most exciting is what they might do with the vast treasure troves of data inside AmEx and the data science team at Kabbage. It is certainly a win for small business owners I would say.
I wish Rob and Kathryn well. They are truly two of my favorite people in fintech. It will be interesting to see how long they stick around or whether they move on to start the next big thing.
