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Sidley advises eBay on $800 million deal - By Dominic Fracassa, Daily Journal

September 30, 2013
Dominic Fracassa
Daily Journal

San Jose-based e-commerce giant eBay Inc. tapped Sidley Austin LLP to help with its $800 million all-cash acquisition of mobile payments company Braintree Payment Solutions LLC, the firm announced last week.

The bulk of Braintree's business is rooted in providing payment processing services to online businesses and e-commerce merchants. Web developers working to set up payment platforms for businesses have praised the ease with which Braintree's technologies can be implemented.

That's a big part of the reason why eBay was so eager to bring the Chicago-based company into the fold, according to attorneys connected to the online payment industry.

"The beauty of Braintree is it works behind the scenes and it's easy for developers to use," said Jones Day of counsel Veronica K. McGregor, who was not involved in the deal. "Up until now, putting in a payment platform has been tricky."
By contrast, PayPal's relationship with developers hasn't been as rosy, according to Erin F. Fonte, an Austin-based shareholder at Cox Smith Matthews Inc., "because of its method of dealing with merchant accounts," she said.

In the past, PayPal has been criticized for its overactive fraud filters that can freeze users' accounts for up to 180 days on suspicion of illegal activity. Providing months worth of sales records, receipts and other documentation is often the only way for legitimate merchants to unlock their quarantined accounts, but businesses often can't afford to have money tied up for that long, Fonte said. Observers agreed Braintree's user-friendly technologies were likely key assets for PayPal in the deal and contributed to the $800 million price tag.

Sidley's team was led by partner Sharon R. Flanagan, who splits her time between San Francisco and Palo Alto, Palo Alto partner Glenn G. Nash and Chicago partner Gary D. Gerstman. Boston-based Choate Hall & Stewart LLP counseled Braintree led by Brian P. Lenihan, co-chair of the firm's private equity group. Sidley partners and eBay declined to comment on the acquisition, and Braintree and Choate Hall could not be reached for comment.

Braintree will operate as a separate service under eBay's PayPal division.
Fonte said it was likely that PayPal was also looking to improve its offerings in the realm of mobile-enabled transactions, another service area in which Braintree was seeing success.

"They want an easy way to start facilitating payments over mobile devices, not just over its Web platform," she said.