American Express to acquire Kabbage for $850m

American Express announced on August 17 that it has agreed to acquire Kabbage, a leading fintech company that provides small businesses with cash flow management solutions. The acquisition will expand American Express’ digital cash flow management offerings for small businesses and bring it closer towards achieving its goal of being an essential partner to these companies. Kabbage will be purchased for an estimated $850m.

Whilst it has been reported that American Express is paying more than $850m, it is still below the $1.2bn valuation Kabbage received in 2017 after a $250m investment from SoftBank. This is more than likely due to the harsh impact that the pandemic has had on the firm, which had to suspend credit lines for some customers and reduce staff.

In fact, Kabbage had to entirely abandon its core business of small business lending due to the pandemic and instead focus on leveraging its platform to facilitate the government's Paycheck Protection Program (PPP) for small companies.

According to the Financial Times, the president of commercial services at American Express, Anna Marrs, highlighted that the strategic rationale behind the acquisition-related to Kabbage's technology for collecting and analysing data for loan underwriting, as well as its other product offerings (such as cash flow management tools and business checking accounts).