The crypto industry is relatively young yet affluent in investment. Despite the industry’s young age, there are multi-million-dollar mergers and acquisitions (M&A) transactions recorded in the industry. The number of M&A deals peaked in 2018 and deep-dived more than half in 2019.
- Crypto M&A deals peaked in 2018 and drastically decreased in 2019.
- The volume of fundraising projects and M&A deals correlates to the crypto market price and sentiments.
- Deals shifted from the Americas to Asia and Europe in 2019.
- M&A deals are more diverse in sub-sectors in 2019 despite a lower deal volume.
A published report by PriceWaterCooper (PwC) is the main reference for this comparative analysis. PwC’s report insights were derived from disclosed data — with the inclusion of probable fraud deals — about M&A in the crypto and blockchain industry. Sources used include Mergermarket, Capital IQ, Crunchbase, Pitchbook, Coindesk, Cointelegraph, and PwC’s own prior analysis. Below, we expound the five drawn conclusions.
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1. A Steep Decline in Deal Volume and Crypto Fundraising Value in 2019
In the PwC report, analysts presented both fundraising and M&A project count for comparison. 2018 serves as the peak year for the cryptocurrency market. No wonder the number of companies — including fundraising and ICO projects — has surged to about 662 in 2018 alone. On the other hand, there were 189 M&A recorded in 2019.
The deal count in the crypto space highly correlates with the cryptocurrency market and industry’s overall performance as a whole. As observed, the peak in fundraising and M&A deals occurred the same year when Bitcoin rallied to $20,000.
In 2019, a sharp drop in deal volume and value for crypto fundraising and M&A occurred. As per the chart below, there are 189 recorded deals in 2018, while only 114 deals in 2019. That is a 40% drop in M&A deal’s volume from the previous year.
2. Deals Shift From the Americas to Asia and Europe
Deal investments recorded are observed to shift towards Asia-Pacific (APAC) and Europe, Middle East, and Africa (EMEA). In 2018, fundraising and M&A in the industry recorded the majority, 55% percent of its projects in the Americas. At the same time, only 26% occurred in APAC and 19% in EMEA.
However, the majority of deals turned to APAC and EMEA in 2019. Deals in the Americas recorded only 48% in 2019, as more transactions occurred in APAC (29%) and EMEA (22%). Both APAC and EMEA deals summed up to 51% of the total activity.
3. Fundraising and M&A in Industry Sees More Diversity in 2019
Also, to further understand the deals that took place, PwC compared the count of fundraising projects and M&A deals by sector within the industry. These data show that in the year 2019, the industry experienced a rapid expansion towards other sectors immediately. However, that boom did expand in the crypto M&A volume as the crypto market slowed down.
Sectors refer to the primary type of business that the target company can be associated to. The sectors are the following: Blockchain Infrastructure; Trading Infrastructure; Mining; Crypto Exchanges; Wallet; Payment solutions; and Compliance and regulatory-related services.
While there are new peripheral businesses such as media, data research, consulting, and wealth management business, which did not relate to a specific sector above were grouped under “Others” for a more precise presentation.
Looking at the chart below, in 2018, mining (28%) was the top sector that accounted for most of the M&A activity. Followed by trading platforms (26%) and blockchain infrastructures (20%).
In comparison to 2019, mining-related deals went down to only 15%. Trading-focused companies took most of the proportion of deals within the industry with 29%. Then, solutions providers come second increased by 20%. Companies providing media and consulting services in the crypto industry listed under the “Others” category spiked to 19% of merger deals.
4. Fundraising Became a Trend For Late-Stage Venturers
The Crypto industry is undoubtedly still on its way to maturity. Some established companies are making their way into the industry by acquisitions, while most of the companies started their venture as start-ups.
According to the chart below, 71% of fundraising projects are in its initial stage, while only 5% is in the post-seed stage in 2018. Similarly in 2019, 59% of M&A deals involve young companies or start-ups that are kick-starting their operations within the industry.
Transaction type refers to the stage of the fundraising transaction: Seed; Undisclosed – Early Stage; Series A; Series B+; and Undisclosed – Late stage and Undisclosed. These classify where the company belongs to as per the age of the company during the time of study.
As a disclaimer, due to limited available information, certain deals have been tagged as an early stage or late stage without exact detail of the funding round. PwC analysts claim to have cross-referenced this information across the source platforms to identify the stages of the fundraise and have updated our data set.
5. Crypto-focused Businesses Drives M&A Deals
The crypto M&A activities continued in 2019, with crypto-focused businesses driving most of the transactions. According to PwC, 9 out of the top 10 deals were strategic in nature and driven by other crypto companies or crypto-focused funds.
In 2018, 42% of the M&A buy-outs were done between crypto and blockchain companies. While in 2019, the sector took more than half of the total accounts, with 56%. Followed by other tech companies and start-ups at 18% in 2018, and 16% in 2019.
RR Author
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