Crypto mergers in decline in 2019 - report

Number and value of mergers and acquisitions declined last year says a PwC report

Crypto mergers in decline in 2019                                 

Cryptocurrency companies kept buying each other last year despite merger and acquisitions (M&A) activity and funding deal flow in the industry declining, according to a report released by multinational professional services firm PwC.

On the M&A side, crypto-native acquirers took 56 per cent of the deal flow, compared to 42 per cent in 2018. The total number of M&A deals dropped from 189 in 2018 to 114 last year, while the value of M&A deals dropped by 76 per cent from $1.9bn (€1.73, £1.52) to $451m.

However, the report also found that in spite of this decline, cryptocurrency firms persisted in buying one another throughout 2019.

The M&A deals that did happen throughout the year were mostly instances of larger companies absorbing smaller companies that provided supporting services.

Meanwhile, fundraising overall decreased by 40 per cent to $2.24 bn and the number of deals dropped by 122. Equity fundraising decreased by less, showing an 18 per cent drop.

The rise of Bitcoin throughout Q2 and Q3 of 2019 didn’t prevent funding from dropping off and therefore the crypto industry should be prepared that funding deals will likely be affected even more negatively throughout 2020 as the economic fallout from the coronavirus crisis continues, the report said.

Last year saw a doubling of corporate venture capital involvement, taking up 6 per cent of the deals.

The type of companies receiving investment also changed year-to-year. In 2018, most VC funding went to blockchain infrastructure projects while crypto compliance and regulatory companies saw the most investment in 2019.

Deal flow is also moving away from the Americas and towards Asia and Europe, which increased their deal share by eight and six percentage points, respectively. Last year was the first year most of the crypto fundraising and M&A deals happened outside of the US.

Meanwhile, companies looking for new institutional clients are heading to Hong Kong and firms looking for a retail audience are considering Singapore’s new regulatory framework, the report says.

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