Despite the overly long cryptocurrency bear market, it is apparent that several organizations have now seen the need for growth using the consolidation and acquisition technique. Based on a report by CNBC, it can be inferred that the declining or rather stagnant growth of crypto prices has not been a deterring factor for investors as more deals are still being recorded in the blockchain stratosphere.
Crypto Sector Grows Despite Market Volatility
During the previous year, we experienced an increase in merger and acquisition activities as stated by data from JMP Securities and PitchBook. According to this data, token values which are associated with startups have remained correlated to Bitcoin (BTC) instead of the company’s actual value. The reasonable explanation for this appears to be the ten years of existence of Bitcoin which implies that it has gained more grounds compared to other digital assets.
Satya Bajpai, a specialist consultant on mergers and acquisitions, and head of blockchain and digital assets investment banking at JMP, while giving his take on this issue, revealed that;
“Even for great businesses, the value of the token remains correlated to bitcoin, which can create an ideal opportunity for strategic acquirers.”
Mergers and Acquisitions; the Favoured Option
Still on the JMP data, it is now becoming popular for investors and founders to choose the use of mergers and acquisition as opposed to starting a new company or a new division from scratch. The analysis shows that over the years, over a hundred virtual currencies cum blockchain-related deals have been unveiled, and if it continues at this pace, it would likely reach 145 before this year runs out. As of 2017, all the acquisitions and mergers were just about 47 as the price of bitcoin was slightly above $20,000.
Satya Bajpai further described this as a form of “land grab,” a situation where people feel the need to buy instead of building. It should not sound strange to anyone that building takes a long time and most times during mergers and acquisition there is usually benefits such as the existence of some ingenious technology and even an existing product as well as the goodwill of the pre-existing companies.