Mergers and acquisitions among cryptocurrency companies have doubled in the past year. Industry insiders seem to be attempting to acquire talent, intellectual property, and innovations in an industry that is expected to see a Cambrian growth cycle.
With crypto markets down from Bitcoin’s all-time high at a tad shy of $20,000, the current community has looked to major players, who have seemingly decided that is an optimal time to consolidate their positions through mergers and acquisitions. So far, as reported by CNBC, 115 M&A deals have been struck in 2018 and the total number of deals is expected to reach 145 by the end of 2018. This has vastly outpaced the 47 deals that were completed in 2017.
Acquirers Getting Bargain Basement Deals In The Crypto Industry
Some of the deals may represent attempts to snap up bargains. According to data from JMP Securities, many of these business deals are valued at less than $100 million each. JMP Securities’ Satya Bajpai said of these relatively low-valued acquisitions:
“As soon as a company becomes interesting, they get bought — the deal size may still remain small, but the number of deals will increase because that’s the most viable and fastest way to grow in this environment.”
The still-shaky cryptocurrency markets indicate that investors have the upper hand in negotiations. Or maybe these investors have been given the opportunity to snap up security tokens at bargain prices in cases where the company has a solid business model or product but is simply undervalued. Investors can basically “bargain shop” for promising companies that have essentially taken a pounding in the markets.
“Even for great businesses, the value of the token remains correlated to Bitcoin, which can create an ideal opportunity for strategic acquirers,” Bajpai said.
Fast-Paced Markets Cause Companies to Look For Shortcuts
In a fast-paced market, companies may not have time to build their own product from scratch, so they look for ways to gain an edge. Some large corporations like Walmart, Mastercard, and IBM might be able to get a jump on the competition by patenting product ideas to gain an effective monopoly first, and then develop later, when they have time. Using patents as a strategic tool has led to criticism from influencers like Roger Ver, who called patents an “illegitimate government-granted monopoly.”
Other companies prefer to take the expensive but time-saving approach of buying stakes in other companies that already have a Minimum Viable Product or at least a promising beta. For instance, Coinbase recently acquired Earn.com, which already has a working platform that enables users to monetize interactions via email.
These factors have driven mergers and acquisitions in the crypto space to new highs even as this budding market remains relatively flat and considerably down from its all-time highs.