Who will eventually acquire PayPal?

PayPal for SaleYou might have thought that yesteday’s news of eBay spinning off PayPal as a separate company was startling news. However whilst that will probably be enough until the middle of 2015 when it actually happens, don’t expect that to be the end of the story, it’s only just beginning.

We’ve been watching the split up of eBay and PayPal for over a year now. Largely driven by one of eBay’s largest investors Carl Icahn, it’s been a long time coming. In April a truce was called when Icahn was given the option of a seat on the board, but it was an uneasy calm before eventually eBay execs called time and announced the split yesterday.

So the split will happen, that’s yesterday’s news and next year’s reality. So can we can all breath a sigh of relief and get on with business? Not quite!

Following eBay’s announcements it appears that the Icahn influence isn’t yet satisfied. He posted a statement yesterday which reads:

We are happy that eBay’s board and management have acted responsibly concerning the separation – perhaps a little later than they should have, but earlier than we expected. As I have said in the past and have continued to maintain, it is almost a “no brainer” that these companies should be separated to increase the value of these great assets and thus to meaningfully enhance value for all shareholders. It also continues to be my belief that the payments industry, of which PayPal is an important part, must be consolidated – either through acquisitions made by PayPal or a merger between PayPal and another strong player in the industry. It is possible that this could be accomplished through a reverse Morris Trust structure because, in light of the development of strong competition such as the advent of Apple Pay, the sooner these consolidations take place, the better. As one of the largest shareholders of eBay, I intend to have discussions in the near future with John Donahoe who, as I have said in the past and continue to believe, has the interest of enhancing value for all shareholders as his major concern.

So spinning PayPal off from eBay is just chapter one in Ichan’s grand master plan. Step two is consolidation where PayPal will either be on the acquisition trail or itself be acquired to satisfy Ichan and in his words the sooner the better. The only real question is does Ichan already have a target company lined up for a possible merger with PayPal and if so who?

The necessary evil

On a side note I know that investors are a necessary evil, they provide the essential injection of cash for companies to invest, grow and prosper and naturally should share in any profits.

However too many times investors end up calling the shots and force companies into making decisions they’d rather not make. Often that’s not good for customers or even the company itself, often the only people who prosper are the shareholders who frankly don’t care if the companies they trade in prosper or fail, so long as which ever the result they make a profit.

I do so hope that’s not the case with eBay and PayPal.