The pace of mergers and acquisitions (M&A) in cryptocurrencies holds a steady ground in the second quarter (April – June ) of 2022 despite unrest in the market due to the challenging macroeconomic environment. In value terms, the M&As in the Q2 2022 came in at $2.969 billion compared to $2.541 billion in the preceding quarter. In the first half of this year, the M&As in the cryptocurrency market stood at $5.51 billion, as per the Architect Partners report. Coinbase and FTX are among the top acquirers.
However, in terms of volumes, the M&A in Q2 was down compared to the previous quarter. In the second quarter, the number of deals in the cryptocurrency market stood at 44 slightly lower than the 48 deals witnessed in the Q1 of the year.
Last year, the number of deals was at a record high at 180 increasing by a whopping 205% yoy. The deals aggregated to $7.8 billion in 2021, rising by a breath-taking 500% yoy.
The number of deals was 59 and 58 amounting to $1.301 billion and $234 million in 2020 and 2019 respectively.
In the last 24 months, the world’s largest cryptocurrency exchange, Coinbase was the top acquirer followed by Graph Blockchain, FTX, Yearn, and Gemini.
Architect Partners in the report said, the first half of 2022 M&A activity exceeds last year’s record pace, however, the second half is more opaque, most likely dipping somewhat. Further, valuations are adversely impacted, however, healthy company valuations remain high relative to general technology and fintech sectors due to growth potential and capital dedicated to crypto.
Further, the report highlighted that private financings are at a record pace in the first half of 2022, in terms of both the number of transactions and total capital raised.
However, the Architect report also said that the total capital raised is trending lower and will likely continue so through the second half.
Seed and early-stage transactions are ~90% of all transactions while attracting ~50% of total capital invested with – games, investing & trading infrastructure, and brokers & exchanges being the most active sub-sectors, the report added. Meanwhile, later-stage transactions accounted for 10% of all transactions while attracting 50% of total capital invested with data & data analytics, brokers & exchanges, and investing & trading infrastructure as the most active sub-sectors. In the first half, sub-sectors earning the highest valuations are investing & trading infrastructure, games, and payments infrastructure.
Among the headline transaction were – Fireblocks ($550m @ $8,000m), Yuga Labs ($450m @ $4,000m), Consensys ($450m @ $7,000m), Polygon ($450m @ n/a), Circle ($400m @ n/a), FTX ($400m @ $32,000m), FTX US ($400m @ $8,000m), Compute North ($385m @ n/a), Animoca ($359m @ $5.359m), Near ($350m @ n/a), Opensea ($300m @ n/a).
In the first half, also, crypto-native investors remain the most active allocators with traditional investors steadily increasing their participation.
“Bridge transactions, those between “legacy” and “crypto” businesses already represent 49% of M&A, expect that to increase over time,” the report added.
According to the report, exchanges, exchange infrastructure, mining, and data & data analytics are both the most mature and likely most active sub-sectors through the 2022 year-end.
“Distressed M&A will be prevalent in Q3, the ramifications of Q2 challenges will be seen,” as per the report.
On Architect Partners, Vetle Lunde analyst at Arcane Research said that during the first half of 2022, we have seen M&A activity aligning with last year’s M&A pace, seeing a total of 92 deals. Assuming a similar growth rate in H2, we can expect 184 deals, slightly above the 2021 total of 180 deals.
Lunde concluded, “legacy businesses are accounting for a larger share of the M&A activity in the market, which reflects a long-term positive outlook on the industry, despite the challenging half-year that has passed.”
