SoFi Moves Forward to Acquire Galileo Despite COVID-19

SoFi, a web-based personal-finance company, announced a deal to acquire Galileo Financial Technologies for $1.2 billion in cash and stock. The transaction includes $250 million in debt, $75 million in cash, and $875 million in equity.

Galileo serves as the payments-processor and API for some of the largest financial technology companies, including Robinhood, Chime, and Varo Money. The company’s financial interface software allows other fintechs to create “bank like” user interfaces. These user experiences include account setup, funding, and direct deposit. Galileo produced $100 million in revenue and processed more than $53 billion of annualized payments volume in March—twice the $26 billion it processed in September 2019.

Galileo raised $77 million in funding in a round led by Accel last fall, according to data provider PitchBook.

Galileo’s CEO Clay Wilkes founded the company in Utah in 2000. He will stay on as CEO of Galileo, which will operate as a subsidiary of SoFi, according to a company statement.

Galileo Had a Tough 2019

Galileo hit some bumps in the road last fall when Chime and Varo experienced outages that were linked to Galileo’s payments platform. “Galileo experienced a database issue in October 2019 that affected a small number of customers including Chime,” Wilkes said in an emailed response to questions posed by Barron’s. “Galileo has taken significant steps to prevent related occurrences.”

SoFi provides a platform for student lending. The Palo Alto, CA-based company last raised $500 million in 2019 in a series H round led by Qatar Investment Authority. SoFi was valued at $4.3 billion at the time. With the acquisition of Galileo, SoFi will now be a tech provider to other fintechs, some of whom are its competitors, one observer said.

“Together with Galileo, we will partner to build on our companies’ strengths to drive even greater financial technology innovation, making those products and services available to both current and future partners,” SoFi CEO Anthony Noto said in the statement.

Galileo has roughly 250 employees. The company is headquartered in Salt Lake City with offices in San Francisco and New York City.

Galileo is the second acquisition for SoFi, and this deal is certainly the largest of the two. In 2017, SoFi acquired ZenBanx for $100 million in 2017.

SoFi Deal Lands in the Midst of Pandemic

The deal for Galileo is going through despite the impact of the Covid-19 coronavirus, which has stopped M&A activity dead in its tracks. U.S.-announced first-quarter deal volume dropped 51% to $252.9 billion as of March 28th from a year earlier, according to Refinitiv. Talks between SoFi and Galileo reportedly started prior to the coronavirus’s effect on the M&A market.

SoFi’s acquisition of Galileo is the most recent large fintech deal of 2020. In February, Intuit announced that it would buy Credit Karma for $7.1 billion. In January, Visa agreed to buy Plaid for $5.3 billion. Galileo is much like Plaid, as it also has an application that helps users link their bank accounts to finance apps and transfer money.

Goldman Sachs and Citigroup were SoFi’s investment advisors, and its legal counsel was WilmerHale. George Boutros, James Kim, and Eric Boyle of Qatalyst Partners were financial advisors to Galileo, and Dorsey & Whitney was its legal advisor.