Creating value by splitting businesses

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Firms Involved

  • Paypal
  • Ebay

Year of the event


Description of the case

Ebay acquired Paypal in 2002 for $1.5bn. at the time, the marketplace was significantly larger than the payment service company, which hoped to leverage on a closer relationship with Ebay to achieve superior growth. However, it became clear, 10 years after the acquisition of Paypal by Ebay, that the two business did not fit together. They each carried very different operations and business. Paypal needed to fly again with its own wings. Under the pressure of activist shareholder Carl Icahn, Ebay agreed to split the business[1], an operation that was carried out in 2015. On the announcement date of the split, Ebay and Paypal stocks appreciated by close to 9%.


  • Separating businesses can create more opportunities and room for growth to each, and hence increase their value: the whole is sometimes smaller than the sum of the parts.


  1. Ebay, Ebay and Paypal to become independent companies in 2015