Blockchain company mergers and acquisitions (M&A) have surged 800% since 2016 according to data collected by JMP Securities. In 2014 there were 11 M&A deals, 23 in 2015, 16 in 2016, 47 in 2017, and 115 in 2018 so far with 145 projected by the end of the year. Despite the crypto market downturn, this data suggests that the blockchain and crypto space may be growing faster than ever.
Specific data for the money transacted for each deal is not provided by JMP Securities, but they do say that the M&A deals are generally global in nature and worth less than USD 100 million each. It may be surprising that blockchain and crypto M&A deals have surged when the crypto market has declined so rapidly, but the reality is this is the best time to buy blockchain and crypto firms since they have become undervalued. The Head of Blockchain and Digital Asset Investment Banking at JMP Securities, Satya Bajpai, says “You’re seeing a mispricing of assets. Even for great businesses, the value of the token remains correlated to bitcoin, which can create an ideal opportunity for strategic acquirers”.
The M&A surge is being fueled by companies looking to acquire blockchain technology rapidly without having to build things from scratch since that takes too long to be competitive. Bajpai says “It’s expensive, but you get the technology and product immediately. This industry is like a treadmill — the only way to keep up on a treadmill is to keep running by investing in new technology. 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 is the most viable and fastest way to grow in this environment”.
Not only do investors get the blockchain technology they need to be competitive through an M&A deal with an established blockchain company, but they also get a userbase and community, which is key to a tech company’s valuation and would usually take a long time to build if doing it from scratch.
Further, blockchain engineers and crypto experts in general are hard to find, especially since the first blockchain and crypto degree program in the United States was just announced by New York University in September 2018, meaning no one has graduated from college with such a degree. M&A deals not only give investors the blockchain technology they desire, but these deals also come with a team of blockchain and crypto experts, which is a rare and precious asset. For example, when Coinbase acquired Earn.com, the Founder of Earn.com ended up becoming Coinbase’s Chief Technical Officer.
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