July 27th – August 2nd
PERSPECTIVES by Eric F. Risley
This week Payward announced the acquisition of Architect Partners’ client, Magic Labs (“Magic”). Magic is a wallet-as-a-service infrastructure provider that enables businesses to create non-custodial embedded wallets for their end users. The acquisition supports Payward’s B2B services offering, Payward Services, giving partners a single access point for trading, custody, tokenized assets, on/off-ramps, and derivatives.
As highlighted in our detailed M&A Alert, the wallet is a crucial element of a B2B offering, acting as the user interface and account layer where consumers actually hold assets and interact. Payward Services had already integrated a competitive wallet solution via a partnership but found itself in a situation where a competitor acquired its wallet solution partner. This created a fundamental question: should Payward own and control a core element of its solution or continue to rely on a third party provider, assuming that third party would continue its support, which is not always a given?
This dynamic plays out daily in strategy discussions in what is often referred to as the buy, build, or partner question. Often partnering with a third party is a convenient strategy; however, dependency is the result. Over the past several years, we have seen a number of M&A transactions driven by partner relationships that became threatened when the partner was acquired. This sets off a need to replace the partner, often in the form of acquiring an alternative. This is exactly the dynamic in this case as well.
As the buy, build, or partner debate occurs within organizations, electing to partner can create future complications which necessitate a change in strategy, often triggering an urgent need for a replacement.