1 December 2022
Cryptocurrency and the Blockchain: How will cutting edge fintech change the M&A landscape?
The sudden and volatile rise of cryptocurrency and blockchain technology has taken the financial technology space by storm. In 2021, the volume of mergers and acquisitions involving companies in the cryptocurrency sector skyrocketed to 180, a threefold increase from the year prior. Memories of the turn of the millennium come to mind as new start-ups and coins balloon to multibillion dollar market capitalisations whilst others falter, to be swallowed up by a bigger fish or fade into irrelevance entirely. The risks are undeniable but, where there is great risk, there is often the potential for a greater reward and tech savvy investors are always on the lookout for exciting opportunities.
Here at Cook Corporate, we have seen first hand the growing appetite for cryptocurrency in mergers and acquisitions, be it a means of payment or as a key part of the business itself. For both buyer and seller, and solicitors on both sides, navigating these waters can seem unfamiliar. We are entering a brave new world of technology and these transactions will be different.
As it stands, the use of cryptocurrency as consideration in mergers and acquisitions remains rare outside of companies whose business is already heavily invested in crypto. The reasons for this are varied. Not even Bitcoin has yet achieved widespread commercial use and the sellers willing to accept cryptocurrency for their business are few and far between. The aforementioned volatility of these coins, not to mention the horror cases of cryptocurrencies that have gone from being worth billions to nothing at all, has naturally left both buyers and sellers wary.
For now, it would seem the use of cryptocurrency to buy companies will remain a niche practice but, as the technology grows in both adoption and regulation, that will no doubt change. The attitudes to cryptocurrency in mergers and acquisitions is already changing. We have worked on a number of transactions in which cryptocurrency has been involved, either as an asset of the target company or as a key aspect of the business. The air of fear surrounding this emerging technology is rapidly dissipating and, here at Cook Corporate, we are excited to see where it goes next.