Experts divided on M&A activity in the crypto industry heading into year-end

A survey of top executives conducted by The Block found differences in valuations of mergers and acquisitions (M&A) deals in the crypto market after the record pace of the first half of 2022.

Michael Ash, Galaxy Digital’s head of investments, said he expects market activity to stay high due to attractive valuations of troubled firms. The current downturn could act as a catalyst, as the outlook increases receptivity to such ideas, he added.

The executive is convinced that many firms could have refrained from acquisitions last year because startup valuations were inflated. His view is not typical of assessments during market downturns, which tend to lower M&A activity and push exits out through an IPO.

“Many are considering such a route even when they are not ready to sell a business. This marks a major shift from last year’s situation where companies and founders discouraged mergers and acquisitions because they could attract money at prices above what they could sell their business for,” — explained the expert.

The publication recalled the troubles of some industry players such as Celsius, Voyager Digital and Three Arrows Capital. This is forcing them to consider M&A deals.

As a result, Nexo договорилась о поглощении Vault, FTX.US заключила сделку с BlockFi с опционом на выкуп компании, а Binance CEO Чанпэн Чжао заявил о переговорах с более чем 50 стартапами.

“We expect troubled companies to remain in that status as they run out of resources and capital. Private investment funds and banks will consider them as an entry point into the industry,” Ash predicted.

Architect Partners, a consulting firm, doubted that the high pace of the first half would persist through year’s end due to heightened volatility. According to the M&A activity report, 49% of deals were related to the acquisition of crypto startups by traditional financial institutions.

Experts agreed that in new deals the focus would be on “problematic” firms. The strongest emphasis would be in sectors such as exchanges, infrastructure solutions, mining, and market data.

“Valuations are falling, but for healthy companies they remain high relative to the IT sector overall and fintech because of growth potential,” they concluded.

As reported in June, media outlets said Goldman Sachs was prepared to attract $2 billion to buy Celsius Network assets.

Earlier, Lightspeed Venture Partners formed the Lightspeed Faction with a focus on crypto industry investments.

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