Crypto-Related M&A Increased By 200% In 2018 Despite Bitcoin Price Slump
According to JMP Securities, merger and acquisition activity in the crypto industry has been on an upward trend this year. Overall, deal flow is reported to have increased by over 200 percent already when compared to last year.
The crypto market has been in some price decline, with any upswings in the year punctuated with more drops. Bitcoin (BTC), the leading cryptocurrency, has lost close to 54 percent of its value since the turn of the year as per data on XBT.net.
The same picture, or worse for some, is replicated on the altcoin front. Coins like Ethereum (ETH), Litecoin (LTC), and Ripple (XRP) have lost over 70 percent of their value year-to-date.
However, as a recent report suggests, this appears to have had little effect on overall crypto and blockchain-based companies in the race to complete mergers and acquisitions (M&A) in 2018.
According to JMP Securities and Pitchbook, M&A activity in the crypto industry has been on an upward trend this year. Overall, deal flow is reported to have increased by about 200 percent by mid-October.
JMP Securities, using data compiled for market researchers PitchBook, points out that the crypto industry is set for a record 145 merger or acquisition deals. Of these, 115 were already sealed by October 15. In contrast, there were only 47 such deals in the whole of 2017.
The seemingly frenzied rush reportedly covers a whole range of crypto deals that have seen several companies or businesses merge, take partial ownership and a few others acquiring outright control through full acquisition.
JMP does not disclose the size of each deal in the 2018 M&A. However, its findings reveal that most of them are “relatively small.” PitchBook estimates put the majority of the M&As at below $100 million, although many have a global appeal.
Crypto lull is an “opportunity.”
The bearish market has undoubtedly left many of the crypto traders scratching their heads, awaiting a decisive run in prices. However, the price declines have offered those after long-term investment in crypto companies, or tech an opportunity.
According to Satya Bajpai, head of blockchain and crypto investment banking at JMP Securities, the decline in Bitcoin prices has affected the rest of the market. It has resulted in a kind of “price mismatch” for assets.
“Even for great businesses, the value of the token remains correlated to bitcoin, which can create an ideal opportunity for strategic acquirers.”
Bajpai also suggests that the market will likely continue to see more mergers and acquisitions due to the rapid growth being witnessed in the sector. The majority of would-be investors now prefer to buy or join with a business that is already in operation than to start one from scratch.
Furthermore, getting into a merger or buying off an investment provides the added advantage of accessing an established user base. As such, many view this route as the most practical and “fastest” for achieving growth in a business.
He also said that though it’s an expensive route, the lure of getting started immediately on a technology or product is worth the risk for many. Bajpal equates the M&A frenzy to a “land grab,” with innovative technology, blockchain talent, market access, and intellectual property on offer.
Bajpal, an experienced M&A advisor, nevertheless says that the crypto industry is like “a treadmill.” To keep with the pace, companies and individual investors need to invest in emerging trends continuously.