PwC: “Large Crypto Unicorns to Become Increasingly like ‘Crypto Octopuses’”
The value of the M&A's in the cryptocurrency world saw strong growth this year as it exceeded the total of 2019 just in the first six months of 2020, according to PwC’s latest report on the crypto merger, acquisition, and fundraising landscape.
Compared to last year's $481 million, the first half of this year recorded $597 million in global deal value as tie-ups became less frequent but bigger.
In the first half of 2020, there were 60 tie-ups versus 125 in the whole of 2019, said PwC.
However, activity continues to shift away from the US as the volume in Asia-Pacific and Europe, the Middle East, and Africa was 57% compared to 51% last year.
The biggest deal of 2020 was made by Binance Holdings, which purchased CoinMarketCap for $400 million. PwC Crypto Leader Henri Arslanian said,
“We expect crypto M&A activity to remain strong for the coming months particularly with some of the larger or more profitable players acquiring firms that offer ancillary services to their current offerings.”
“We should expect the large crypto unicorns to become increasingly like ‘crypto octopuses’ by acquiring or investing in various ancillary businesses in order to remain dominant.”
Digital asset manager CoinShares also anticipates the materialization of a “more robust M&A market” but says significant industry consolidation is likely to come first to clean up the market fragmentation.
According to them, crypto companies need to demonstrate the ability to generate recurring revenue and stable cash flow, consistent delivery on growth metrics, low margin volatility and above-average margins, low revenue concentrations, and low founder involvement.
According to PwC, the first of the year also saw a spike in fundraising involving trading companies or cryptocurrency exchanges, which has been attributed to the rising digital asset prices, greater regulatory clarity, and increased institutional interest.