PayPal, having sat and watched the success of Square, pulled the trigger on a $2.2 billion acquisition yesterday aimed squarely at its payments and point of sale rival.

PayPal acquired iZettle — a Swedish SMB/SME payment platform — with the aim of keeping pace with Square’s expanding footprint of services for smaller merchants. PayPal believes, as does many operators in the SMB space and the TAI team, that “Small businesses increasingly want a full suite of capabilities across channels, a one-stop stop.” So said PayPal CEO Dan Schulman in an interview published in Bloomberg.

PayPal plans to leverage the iZettle platform to pursue additional business Europe and Latin America. I’m not a banker, but it seems like PayPal paid a healthy premium here. Based simply on transaction value processed, PayPal is paying about $0.37 for every dollar of transaction processed while Square trades at an estimated $0.31 for every dollar of transaction. That about a 20% premium. iZettle had been considered an IPO targeting $1.1 billion.

PayPal to buy iZettle for nearly $2.2 billion from CNBC.

Back in The Kelsey Group days, we saw PayPal as having a great opportunity in the local SMB space. We’d watch as they would add companies like Where and wonder when would they aggressively pursue brick and mortar establishments. This move suggests PayPal is  in acquisition mode. What other targets might be on their list?

Setting aside the price discussion, this transaction offers one more example of the race for scale and integration in the SaaS/cloud SMB business operations and marketing space that TAI covers. No doubt we are in the early stages of consolidation cycle that could last well into the next decade. Expect to see many more such moves as players seize on the opportunities to bring enterprise class cloud services and solutions to the millions and millions of small businesses around the world.

As an aside, as I was reading about this deal, this ad got pushed in front of me.

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