Stripe and Advent have proposed a $50+ billion take-private acquisition of PayPal. It's a mega deal that doesn't fit neatly into any traditional M&A category. 

Stripe is the private payments giant. 

Advent is one of the largest global PE firms. PayPal is a public payments company with $33 billion in revenue. 

And the combined transaction is arguably too big for a traditional buyout, which is exactly what makes it interesting.

In this episode, Debs and Graham dig into what makes this deal different, then put Anthropic's newest model, Fable 5, to the test on building an LBO model for the transaction. 

Graham walks through why this isn't a standard LBO: rather than a private equity firm buying PayPal outright, Advent is partnering with Stripe to fund the equity portion, taking an ownership stake in the combined group. 

That hybrid structure is becoming more common at the mega end of the market where traditional buyouts run into scale constraints.

Graham also flags a specific complication with payments companies: not all of PayPal's cash is available for financing the deal. 

Payment companies hold customer cash to settle transactions, which sits on the balance sheet but isn't operational cash. 

Fable 5 catches this nuance early, suggesting a $3 billion minimum cash floor and excluding customer funds from the financing calculation. 

That's the kind of judgment call that separates a first-year analyst model from a professional one.

The Fable 5 output produces a working LBO model with specific assumptions: five times leverage split three-to-two between term loan B and senior notes, a 30% purchase premium to the current PayPal share price, a five-year hold period, and a 20% tax rate. 

The base case returns come out at $66 billion exit equity value against $24 billion at close, generating 2.75x money multiple and 22.4% IRR. Debs and Graham walk through whether those assumptions are too cautious (they're using lower leverage than the actual proposed transaction), what a higher purchase price would do to returns, and where the standalone LBO framing doesn't fully reflect what the actual deal is trying to accomplish.

The episode closes with a promise to revisit as the deal evolves: the $60.5 initial offer has been rejected, negotiations continue, and the combined group structure will reveal more about Stripe and Advent's real thinking on equity returns. Watch this space.

Key Discussion Points:

• The Stripe/Advent/PayPal deal: what's been proposed and where it stands
• Why this isn't a traditional LBO: partnering with a private company as buyer
• The customer cash complication in payments company M&A
• The platform-play thesis: private equity's mega-deal strategy in 2026
• Fable 5's LBO model: five times leverage, 100% cash sweep
• The verdict: $66B exit equity value, 22.4% IRR at base case
• Where the assumptions might need adjustment
• What the standalone LBO framing doesn't capture about the real deal

What's the Big Deal? is an educational podcast covering deals and market developments in public and private markets. Nothing in this episode constitutes financial advice.

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