PROG Holdings Acquires BNPL Company Four Technologies

On July 13th, PROG Holdings announced the acquisition of Four Technologies. PROG, best known for their ownership of Progressive leasing, a cutting-edge lease-to-own solutions provider, aims to further advance their Buy Now, Pay Later (BNPL) portfolio with this deal. 

PROG provides non-immediate payment options for consumers with substandard credit. Their most established company, Progressive Leasing, allows these previously overlooked consumers to acquire large-ticket items through an advanced lease-to-own plan generator. Progressive Leasing provides instantaneous and customized solutions for almost any transaction due to their advanced tech-integrated platform. Much of the company's success is attributable to their inclusive business model; they serve consumers that traditional leasing services would not. By operating within the margins of the industry, they are able to realize the profits left behind by the industry. CEO of Progressive Leasing, Steve Michaels, stepped into the role a little over a year ago and has demonstrated strong ability to grow the payments company. He is a CPA and has worked over 35 years at the retailer, The Aarons Company, in various roles including president. 

Four Technologies, a relatively new player in the field, was founded in 2018. Four’s proprietary software allows consumers to pay for merchandise through four interest-free installments. Since its inception, Four has been able to amass a substantial customer base, and continues to grow rapidly. 

Much of Four’s success can be attributed to CEO Chaim Lever who has developed the company significantly over the past two years based out of the Fort Lauderdale and Miami areas. Lever has had experience working for a company that provided institutional trading benefits to everyday individual investors. This work in the fintech space launched him into the BNPL area and gave him over 5 years of experience.

Lever was quoted saying, “Five payments of $20 seems less detrimental to a wallet than a one-time $100 fee”. This is one of the core ideas that a BNPL process is based on and Four’s vision. 

PROG plans to utilize Four as a catalyst for further expansion in the BNPL industry. While a possible merger between Progressive Leasing and Four is certainly not off the table, PROG has made no official comment regarding their strategic deployment of the acquirer. 

The BNPL industry has experienced rapid recent growth. While the tech-backed platforms provide an easy, seamless transaction for both customer and retailer, much of the value is derived from immediate revenue gains due to increased average transaction size. When offered a BNPL solution, customers who were previously unable to make large purchases are no longer inhibited by upfront price. Additionally, the psychological phenomenon known as “Sticker Shock” is significantly reduced. Sticker shock occurs when potential customers are deterred by the unexpectedly high or recently increased price of any given good or service. With BNPL, this reaction can be partially mitigated, therefore increasing the likelihood that a purchase will be made. This theory has worked surprisingly well in practice; according to PayBright, a leading Canadian BNPL company, some businesses observed an increase in average order value (AOV) of over 30% when offering a BNPL option.

The standardization of BNPL also offers exciting prospective benefits. BNPL is not a new concept; companies such as WalMart, who made LawAway programs common practice, have been successfully using this method for many years. However, the industry is fragmented. Internal financing solution programs used by companies like Target and WalMart are limited and specialized. Talk about how a singular BNPL company across many retailers would allow for a better and easier process. 

BNY Mellon to acquire fund management tech firm Milestone Group

New York City-based investment banking services holding company, BNY Mellon, announced on July 12th that they have finalized an agreement to acquire fund management tech firm Milestone Group. Milestone Group is an investment automation company that BNY Mellon procured to expand their digital platform and offer new services to their customers.

With $2.2 trillion in assets under management, BNY Mellon is the world's largest custodian bank and asset servicing company. It is imperative for a bank of this size to continue to digitize and be on top of the market as far as innovation, efficiency, and compatibility. FinTech companies are important assets to banks such as BNY Mellon as they allow them to expand their digital capabilities and offerings. Milestone Group and BNY Mellon had an existing partnership for a year prior to the announcement of the deal to create a set of net asset value (NAV) services for asset managers and asset owners. Now, BNY Mellon looks to expand on the existing services. With this acquisition, they will now be able to provide OCIO services, cash allocation, and fair value control solutions to their existing capabilities. The abilities of Milestone Group lead the global funds industry in automation efficiency, cost of ownership and risk control. 

"We gain both industry-leading technology as well as the expertise that Milestone is known for globally. This is a significant step in our continuous evolution — blending leading edge technologies and services to deliver greater efficiency and value for our clients," said Roman Regelman, BNY Mellon's CEO of Asset Servicing and Head of Digital.

Terms of the acquisition were not publicly disclosed. Closing of the transaction is subject to customary conditions and approvals and is expected to occur in the second half of 2021.

Zoom to Acquire Five9 for $15 billion

On July 19, 2021, Zoom Video Communications (NASDAQ: ZM) announced that they have agreed to acquire Five9, Inc. (NASDAQ: FIVN), which is expected to close in the first half of 2022.

Zoom Video Communications is a software-as-a-service company that specializes in cloud-based and online meetings and calls through their proprietary software. Zoom’s rise was greatly accelerated by the pandemic. When the lockdowns came, there was a sudden global need for video conferencing in industries that can operate outside of a physical setting, such as education of all levels, religious institutions, and other software producers. Zoom is led by CEO Eric Yuan. He has been involved with engineering and conference calling companies since 1997. He has held Vice President of Engineering roles in WebEx for a decade, then at Cisco for four years before founding Zoom in June 2011. His vast experience within the virtual meeting space allows him to better guide Zoom in post pandemic times.

Five 9, Inc. is a contact center as a service. They help manage customer interactions with voice, SMS, chat, email, social, and more. Their services incorporate AI, which is designed to be secure and scalable. Five9 is led by CEO Rowan Trollope. He became CEO in 2018. Prior to the role, he held several high ranking roles in Symantec, now NortonLifeLock, and Cisco. His experiences help provide the focus on security and integrated technology to Five9. 

The deal is set to be stock based. Five9 shareholders will receive 0.5533 shares of Zoom common stock. The implied transaction price, based on Zoom’s close on July 16, 2021, is $14.7 billion. On announcement of the deal, Five9 stock rose nearly 6% between Friday’s close and Monday’s open, whereas Zoom stock slid 4.5%. Zoom has been sliding since its one month high of $401.12 on July 6. 

Many people are familiar with Zoom since the pandemic led to a great need for virtual meetings. As a result, Zoom has seen a meteoric rise in both its revenue and its stock. However, with the advent of the covid vaccines, Zoom must now navigate post-pandemic society. With calls for a hybrid work model at minimum.

This acquisition will help bolster Zoom’s presence with customers and allow the company to focus on this long-term growth opportunity by entering the $24 billion contact center market. Five9’s highly-scalable and secure cloud contact center is a comprehensive suite of easy-to-use applications that allows companies to manage and optimize their customer interactions across many different channels. According to Eric Yuan, combining Five9’s contact center as a solution with Zoom’s broad communications platform will transform how businesses connect with their customers, building the customer engagement platform of the future.

As mentioned before, the trend towards a hybrid work model has accelerated over the last year, which is advancing contact centers’ shift to the cloud. In addition, there is an increasing demand by customers for a more customized and personalized experience. This acquisition should help Zoom maintain the momentum it picked up during the pandemic.

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