"Buy now, pay later" company Sezzle has laid off a substantial portion of its staff as it merges with larger company Australia-based Zip.
Minneapolis-based Sezzle said it is laying off 20% of its North American staff, but worldwide Sezzle is cutting about 40% to 50% of its employees, including substantial cuts in Europe, according to a person familiar with the staff reductions. Sezzle declined to comment on global layoffs.
On Feb. 27, Minneapolis-based Sezzle agreed to be acquired by Australia-based Zip for $353 million. The deal is expected to close by the end of the third quarter.
Zip declined to comment, referring inquiries to Sezzle.
The announced layoffs, which are across all business operations, will provide $10 million in annual cost savings, Sezzle said.
The Sezzle-Zip deal is the latest consolidation in the hot "buy now, pay later" sector: Zip had previously bought Quadpay, and Block recently closed its acquisition of Afterpay. (The all-stock deal, initially worth $29 billion, ended up being worth less than $15 billion because of the decline in Block’s share price.)
The acquisitions show that global scale in this sector matters, particularly as these companies become full-fledged consumer credit companies that need to cut large deals with merchants and other financial institutions to compete. Besides "buy now, pay later"-focused Affirm, Klarna and Block’s Afterpay, others such as PayPal have a large presence in "buy now, pay later,” and credit card networks American Express, Visa and Mastercard also have offerings.
Zip and Sezzle previously touted the enhanced “U.S. footprint” of the acquisition with a combined 8.8 million U.S. customers and 60,500 U.S. merchants through the deal, and a combined 13.3 million global customers and 128,800 global merchants.
The Sezzle layoffs were being made to cut the company’s burn rate while the acquisition was taking place and in order for the deal to be completed, the person familiar with the cuts said.
In a release Thursday Sezzle said the cuts were being made “to continue to position the business for long-term growth with establishing a path toward profitability and free cash flow.”
Zip, which reported a loss of $79.6 million in the second half of 2021, previously has said that the Sezzle deal would provide cost savings that would enable the company to become profitable in 2024, citing potential “reduction in combined employee expenses and duplicative roles.”
Some Sezzle employees were notified of the layoffs Wednesday morning, according to the person.
Sezzle has employees in North America, India and Europe. The company listed its shares on the Australian Stock Exchange in 2019, citing the familiarity of investors in that country with the “buy now, pay later” business model, and was seeking a U.S. listing.
Zip has set up “buy now, pay later” with large merchants such as Amazon, Walmart and others. Sezzle’s strengths are small and mid-sized merchants, though it also signed a three-year deal with Target last year.