In morning trade the Zip Co Ltd (ASX: Z1P) share price has charged higher following the announcement of a new acquisition.
At the time of writing the buy now pay later provider's shares are up 5% to an all-time high of $4.10.
What did Zip Co announce?
This morning Zip Co announced that it has entered into an agreement to acquire the Spotcap ANZ business from global small and medium-sized enterprise (SME) lending provider Spotcap.
According to the release, management believes the acquisition provides Zip Co with significant capability in the SME credit space.
This is because it provides a proven SME credit decisioning platform that has been live in the market since 2015. During that time Spotcap ANZ has loaned over $130 million of funds in the SME market across the region, with loss rates of less than 3% per annum.
The deal also gives Zip Co an accelerated go to market strategy for the recently announced Zip Biz buy now pay later product in both Australia and New Zealand.
Another positive is that the acquisition will give Zip Co access to Spotcap's underlying intellectual property and technical code base which it expects to assist in driving continued innovation in its business-focused digital wallet product offering. This intellectual property will be licensed perpetually from Spotcap Global.
Zip Co's chief executive officer and managing Director, Larry Diamond, commented: "Extending our consumer BNPL product offering into the SME space is a natural evolution for Zip. The strategic acquisition of Spotcap will fast-track the delivery of this product using a proven origination platform that is live in the Australian and New Zealand markets."
This sentiment was echoed by the company's chief operating officer, Peter Gray. He added: "What impressed us most about the Spotcap platform was the proven underwriting track record, the use of bank transactional data and smarts around cash flow forecasting. Their commercial underwriting approach very closely aligns with what we have built on the consumer side."
Zip Co will acquire Spotcap ANZ for a total consideration of $8.825 million, to be settled through the issue of new fully paid ordinary shares and subject to an agreed level of net working capital.
The Spotcap vendor entities will be required to deposit ~$3 million in cash to be held in escrow subject to the achievement of certain operational and integration milestones. Management expects to complete the transaction by no later than November 15.
Elsewhere in the industry, the Afterpay Touch Group Ltd (ASX: APT) share price is up 3% and the Splitit Ltd (ASX: SPT) share price is down 1% in early trade.
