Fintech and other cryptocurrency firms are in the spotlight again. Disruptive technologies are on the brink of dramatically changing investing across multiple sectors, and strategic deal makers are looking to embrace public ledgers and digital tokens. In the last year, the merger and acquisition market has taken a growing interest in the cryptocurrency space. According to JM Securities, the number of deals involving crypto firms increased by 54% in 2017.
In October this year, CNBC reported there has been a total of 115 mergers and acquisitions involving cryptocurrency or blockchain, and more deals are expected by the end of 2018.
The flurry of full and partial sales has been described as a “land-grab” as established enterprises look to expand their services with the latest technologies. M&A deals make it easier for investors to access emerging technologies rather than building from the ground up. Promising fintechs also come with an established base of users and stakeholders, making mergers and acquisitions a more popular growth strategies than any other time in history.
M&A Takes Advantage of “Crypto Bear Market”
Following Bitcoin’s meteoric rise to an all-time high of almost $20,000 per token, the cryptocurrency market has been in steady decline. During the last year, cryptocurrencies have lost more than 65 percent of the total market capitalisation. According to CoinMarketCap, trading volumes have dropped by 55 percent.
The lengthy bear market has not deterred key players however, many of whom see the extended downturn as an opportunity to expand through consolidations and acquisitions for bargain fees. Although the actual fee for recent deals have not been disclosed, JM Securities report they are likely to have been less than $100m – an absolute steel in today’s burgeoning tech economy.
The reason for so many bargains is that the value of digital tokens is tethered to Bitcoin, rather than the actual value of the company itself. With Bitcoin prices crashing heavily in the last 15 months, this is an ideal opportunity for strategic buyers to strike.
Expected Growth of Cryptocurrencies
Whilst cryptocurrency has received a lot of bad press, major players in industry are more interested in the public ledgers that support digital tokens. Rather than digital currencies themselves, the value of fintechs lies in the quality of their blockchain technology. The blockchain has the potential to dramatically improve industries and effectively change the world as we know it. This disruptive technology has the potential to put an end to bureaucracy and at the same time, automate processes, speed up transactions and lower costs.
Innovation is the most crucial factor in the evolution of global societies, and multiple promising developments are emerging worldwide.
The blockchain has the potential to revolutionize current paradigms in multiple ways, and the recent growth of the M&A market is the strongest indication yet that disruptive technologies will emerge into the mainstream in the very near future.
If you’re contemplating merging or acquiring a fintech in the cryptocurrency and blockchain space, speak to one of the experts at ICLG. Our comparative guides written by lawyers with years of experience in the M&A market and can assist you in completing a deal that is satisfactory for both parties.