The next saga in the SMB lending space: @AskAmex buying ATL-based @KabbageInc for $850M (all cash, supposedly).

This is interesting for a few reasons

First, Amex is already the largest provider of small business credit cards and has been aggressively pursuing this category for a few years. This means they have an easy channel for distribution of loans & cash mgmt tools to these same customers.

Kabbage’s biggest issue was a lack of ability to get one-time SMB borrowers to become repeat borrowers — this led to high acquisition costs and tough unit economics. Amex can easily solve this distribution problem.

Second, they’re getting a decent deal here, Kabbage’s latest round was in 2017 when Soft Bank invested $250M at a $1.3B valuation. Another tough break for Soft Bank. Despite PPP lending programs, they furloughed a “significant number” of staff in March and closed several offices.

While being a tough outcome for Soft Bank, this is probably the best / biggest SMB lending exit in recent history. OnDeck ($90M) and FundingCircle (~$300M mkt cap) both had tough exits. Kabbage raised ~$500M in total.

This is the second acquisition Amex has made in the last year, after they bought acompay. Their B2B suite now includes payments, cash flow management, and a robust lending business.

Interesting to see Amex getting more heavily embedded in SMB lending & cash flow mgmt tools, another story of driving additional revenue per customer by adding lending products. Very curious to see what this means for B2B neobanks that are likely planning to go this route too.

Third, Amex is buying Kabbage’s technology but NOT their loan book. Feels like a smart move to get all the benefits of their platform without the baggage of the loans.