A new report has concluded that increased M&A activity this year could prove just how quickly the crypto industry has matured – and how rapidly mainstream companies are becoming infatuated with this fledgling business sector.
These were the findings of a review and outlook report from the Spartan Group, an Asia-based blockchain advisory firm established by three former Goldman Sachs staffers.
They made a number of predictions about the 2021 M&As market, including the following claims:
- The American crypto exchange giant Coinbase will “continue its spree of acquisitions leading to its initial public offering (IPO)” in Q1/Q2 2021, and the IPO will be a “catalyst” for further major listings (e.g., BlockFi, Digital Currency Group) in the wider industry and other regions.
- 2021 will see larger deal sizes and an entry of fintech firms (payments companies, digital wallets, apps etc.) among the most active buyers: “The entry of Fintech players will enhance competition between fintech companies and crypto exchanges to secure key infrastructure players and customers, which in turn will push valuation multiples in M&A transactions higher.”
- Regulatory measures from the Financial Action Task Force (FATF) and others will lead crypto players to make compliance-related M&A deals: “Consequently, this will motivate transactions on two opposing fronts: 1) from buy-side firms looking to acquire regulated entities and 2) unregulated actors looking for potential exits for their shareholders via mergers or acquisitions.”
- Crypto-only operators will attempt to “offer broader financial products,” a factor that could influence their M&A decision-making: crypto native platforms are expected to make targeted acquisitions of tokenization technologies to allow them to capture the value generated from offering a wider range of innovative products.
The authors added their forecast that “traditional financial institutions will look to take a stand in the sector” – a prediction that has already become a reality in East Asia, where a number of Japanese securities firms and internet companies have already moved into the crypto space with key M&A deals. And in South Korea, commercial banks Shinhan and Kookmin have already moved in to co-found joint-venture crypto firms with blockchain firms.
“Despite the increase in participation, these institutions will remain conservative in their acquisition strategy, shying away from immediate acquisitions of crypto asset managers and brokerages,” Spartan Group said, estimating deals in sectors supporting key operational pillars including custody, data analytics, and security.
Also, the report found that in 2020, the following M&A milestones were met:
- At least 92 deals transacted in the industry, for a total of around USD 691 million
- The USA was the “most active region within the M&A space,” with Europe following
- However, Asian heavyweights have also made their presence felt. Binance was the biggest M&A player, with five deals, with the Japanese financial giant SBI completing two key moves (snapping up domestic rival exchange TaoTao and UK-based liquidity provider B2C2
- Other major M&A movers were ConsenSys (which made four deals), BitGo, Galaxy Digital, Metal Pay, Securitize and Voyager Digital Canada (which all made two)