State of Crypto M&A: How It’s Shaping the Industry w/ Ricky Tan From Tokendata

arbarians on the Blockchain
TokenData | Research
A comprehensive review of Crypto M&A

The information contained in this publication is of a general nature only. It is not meant to be comprehensive and does
not constitute the rendering of legal, tax or other professional advice or service by TokenData Inc ("TokenData").
TokenData has no obligation to update the information as law and practices change. The application and impact of laws
can vary widely based on the speciﬁc facts involved. The materials contained in this publication were assembled in
September 2019 and were based on the law enforceable and information available at that time.

This publication contains material, including but not limited to software, text, graphics and images (collectively referred to
as the “Content”). We may own the Content or portions of the Content may be made available to us through
arrangements that we have with third-parties. The Content is protected by United States and foreign intellectual property
laws. Unauthorized use of the Content may result in violation of copyright, trademark, and other laws. You have no rights
in or to the Content, and you will not use, copy or display the Content except as permitted by TokenData. No other use is
permitted without our prior written consent.
DISCLAIMER

Table of Contents
1. Introduction

2. Review

3. M&A Deep Dives

4. Decentralized M&A

5. Key Takeaways

Introduction
While the cryptocurrency industry* is still in its infancy there has been a
rise in mergers & acquisitions involving crypto companies. However,
beyond anecdotes, press releases and high level summaries, there
haven't been any thorough or forward-looking analyses, until now.
*We take a broad interpretation including blockchain technology and DLT (Distributed Ledger Technology) companies
NUMBER OF DEALS
350
TOTAL DEAL VALUE
$4 Billion
MOST ACTIVE ACQUIRER
Coinbase
2018
AVERAGE DEAL VALUE
$10M
MOST COMMON DEAL TYPE
Acquihire
LARGEST TRANSACTION
Circle - Poloniex
MOST ACTIVE YEAR

Review
1. Deal Activity

2. Deal Value

Review: Deal Activity
*2019 Deal Activity is estimated at 92 acquisitions. At the time of publication in
November 2019, 77 deals had been confirmed so far.
350 acquisitions involving cryptocurrency and blockchain
companies have taken place since 2013. M&A activity peaked in
2018 with more than 160 deals, and we estimate 90-100 deals* for
2019. While deal activity can reflect value creation it can also
represent an industry struggling to find (product) market fit. Digging
into deal types, stakeholders and dynamics will paint a better picture.
M&A activity is volatile and seems positively correlated to
crypto prices and industry sentiment. Monthly activity peaked
in early 2018 as prices and industry attention soared. Although
more time and observations are needed for a robust conclusion
about the correlation with price, we uncover other drivers of
deal activity in this report's deep dives.
Monthly deal activity (left axis) vs
Monthly price of Bitcoin (right axis)
Annual deal activity
(number of announced deals)

Review: Deal Value
We estimate total deal value at $4 Billion since 2013*, with
$2.8B of M&A activity in 2018 and $700M in 2019. These
figures might sound impressive, but are small compared to the
total network valuation of cryptocurrency networks ($200B+)
and M&A value in other tech sectors**. This makes sense
given the early stage of this industry: most companies are less
than 5 years old and a significant IPO seems years away.
ACQUIRER TARGET YEAR SIZE SIGNIFICANCE
Circle Poloniex 2018 $400M
Largest acquisition to date, but Poloniex
has since spun-out
BK Global
Consortium
Bithumb 2018 $350M
Buy-out of Korean exchange by a
financial buyer consortium
Lightyear Chain 2018 $350M
Development team (Lightyear) of a
public blockchain (Stellar) engaging in
M&A
TRON Bittorrent 2018 $125M
Largest acquisition to date by an ICO-
funded team (TRON)
Coinbase EARN 2018 $100M Talent & technology
Coinbase
Venovate/
Keystone
2018 $10-25M Regulatory driven M&A
Galaxy Digital
Bradmer
Pharmaceutical
2018 N/A Reverse merger
Kraken Cryptofacilities 2019 $100M
Acquisition of a regulated derivatives
platform
Coinbase
Custody
Xapo Custody 2019 $55M
Horizontal merger of custody
businesses
Facebook Chainspace 2019 $5-10M
Acqui-hire of blockchain development
team to work on Libra project
Binance JEX 2019 N/A Acquisition of a derivatives platform
Coss ARAX 2019 <$5M The industry's first token merger
A closer look at marquee transactions and interesting deals shows
only one $100M+ transaction in 2019, versus five in 2018. However,
2019 has seen interesting acquisitions such as the acquisitions by
Facebook for its Libra project, the consolidation in the crypto custody
space (Coinbase-Xapo custody) and the first token merger.
*While most acquisition announcements are public, key details and deal value are typically not disclosed. We've estimated the value-range for each acquisition
and plotted the annual totals. We have used confirmed deal values (public and confidential) and extrapolated the associated multiples for the unconfirmed deals. 
**https://www.ey.com/Publication/vwLUAssets/EY-Software-Overview-March-2019/$FILE/EY-Software-Overview-March-2019.pdf
Annual deal value estimates
(black vertical line indicates the range of
estimates)

1. Financial vs Strategic

2. Sectors

3. Exchanges

4. Acquihires & Technology

M&A Deep Dives

Financial vs Strategic: Not all M&A
is created equally
We can split deal activity into two categories: Financial and
Strategic M&A (description in table).

2018: Financial M&A with obscure motives 
As shown in the graph, Financial M&A outpaced Strategic M&A in
2017 and matched it in 2018. A closer look at the Financial M&A
activity shows that many acquisitions consisted of a) defunct non-
crypto companies turning into crypto investment companies (e.g.
Long Island Blockchain) by acquiring small cryptocurrency
startups and b) reverse mergers, in which private crypto
companies acquired listed shell-companies.

2019: Strategic M&A continues its strength 
The opportunistic and sometimes obscure Financial M&A
disappeared during the market correction in 2018 and has been
absent in 2019. Strategic M&A has held up well, with a projected
70 deals for 2019. While total deal activity has dropped 50% year-
on-year, the consistency of Strategic M&A is a positive sign of
cryptocurrency startups working on market-ﬁt.
DEAL TYPE STRATEGIC M&A FINANCIAL M&A
Deal Purpose
Strategic: Consolidation, Talent,
Technology, Vertical Integration
Financial: Investment Returns
Deal Types
Acqui-hire, Technology tuck-in,
Horizontal/Vertical Merger,
Diversiﬁcation
(Leveraged) Buy-Out, Reverse Merger,
Portfolio Investment
Typical Buyers Exchanges, Infrastructure Projects Investment Funds, Private Equity
Annual deal activity
split by deal type

Sectors: Funds & exchanges in
the front seat of acquisitions
>50% of M&A is done by investment funds and exchanges:
Investment funds* and cryptocurrency exchanges are the most
active acquirers. Combined, they represent more than half of all
deal activity and deal value.

Exchanges as prolific strategic buyers: Trading and
speculation are crypto's first killer-app. The rising prices, positive
market sentiment and annualized volatility above 100% have
mainly benefited exchanges such as Coinbase/Binance/Kraken,
giving them the necessary cash reserves and networks to
engage in acquisitions.

"Pay to Play": Non-crypto companies have been acquiring
cryptocurrency startups to increase their industry presence. The
majority of these acquisitions are talent-focused acquihires. For
example, Facebook has acquired two startups (Chainspace &
Servicefriend) for its Libra and Calibra development efforts.
*This does not include venture capital funds investing in cryptocurrency startups,
but covers niche Private Equity funds and Investment Vehicles acquiring
cryptocurrency companies as a whole.
Crypto Infrastructure & Mining: Crypto infrastructure companies
and development teams of protocols and decentralized
applications (dapps) have also been active, with 40 acquisitions.
Mining companies were very active before the market correction in
2018, but have been largely absent in 2019.
Deal value per sector (horizontal axis) vs
Deal activity per sector (vertical axis)

Exchanges: Coinbase is the M&A
powerhouse
Exchanges and trading-related companies are the most active
strategic buyers. But which companies are the active dealmakers
in the space?

Coinbase is the leader in Strategic M&A with 16 acquisitions.
While the company's M&A strategy mainly consists of acquihires
and technology "tuck-ins", it has also engaged in two significant
acquisitions such as Earn ($100M) and Xapo's custody business
($55M).

Kraken and Coinsquare follow Coinbase, with Kraken involved in
7 deals and Coinsquare (a Canadian cryptocurrency exchange) in 5
deals. A significant transaction was Kraken's $100M acquisition of
Cryptofacilities, a regulated cryptocurrency derivatives exchange
based in the UK.
Where's Binance? Despite its size, growth and breadth of
offerings, Binance has engaged in "only" 3 public acquisitions
(Trustwallet, JEX, Wazirx) so far. However, Binance does have
significant investments in other crypto companies and partnerships
that have the same strategic effects as M&A.
ACQUIRER TARGET REGULATORY ANGLE COUNTRY
Bakkt RCG
Bakkt acquired assets of futures broker RCG which Bakkt quoted
"will contribute to our regulator...operations"
USA
Circle Seedinvest
Circle acquired equity crowdfunding platform Seedinvest which is
a registered broker-dealer. Seedinvest was also approved as an
ATS
USA
Coinbase
Venovate/
Keystone/
Digital Wealth
Coinbase acquired three entities in order to become a FINRA
registered broker-dealer in addition to getting appropriate ATS
(Alternative Trading System) and RIA (Registered Investment
Advisor) licenses
USA
Huobi BitTrade
Asia-based crypto exchange Huobi acquired Japan-based
Bittrade, making Huobi 1 of 17 exchanges in Japan that are
offically licensed to trade crypto
Japan
Kraken Cryptofacilities
Kraken acquired the UK-based crypto derivatives exchange
Cryptofacilities. Cryptofacilities is regulated by the UK Financial
Conduct Authority
UK
Smartlands Shojin
Smartlands, a Security Token Issuance platform, acquired UK-
based Shojin Financial Services allowing Smartlands to issue and
sell real-estate linked security tokens
UK
Trade.io Primus
Crypto exchange trade.io acquired UK-based FX brokerage
Primus Capital Markets, which is regulated by the UK Financial
Conduct Authority
UK
Uphold JNK
Crypto exchange Uphold acquired JNK Securities Corp, a licensed
broker-dealer
USA
M&A as a way to overcome regulatory hurdles: M&A is used by
cryptocurrency exchanges as a strategic tool to gain regulatory approval in
certain jurisdictions or for certain products. They do so by acquiring a
company which has the relevant regulatory licenses. We count 15 deals
(some examples below) that have taken place since 2018 and explicitly
mention regulation as an important aspect of the acquisition in their
announcements.

Acquihires & Technology Tuck-ins drive
strategic M&A activity
To understand the rationale of each acquisition we have categorized all
acquisitions into three different strategic types:

Talent & Technology Tuck-Ins* are the most common type of strategic M&A within
the cryptocurrency industry and have been steady throughout 2018 and 2019. The
focus on acquihires and early-stage technology acquisitions suits nascent industries.

Horizontal mergers represent only a quarter of all strategic deal activity. However,
they make up more than half of strategic deal value as they typically represent the
consolidation of larger and more mature businesses.

Diversification deals are a mixed bag. Within this category fall acquisitions in which
crypto companies acquire traditional financial institutions for their regulatory licenses
(e.g. Coinbase, Bakkt, Kraken) and acquisitions in which cryptocurrency protocols
acquire non-crypto companies for their existing user base (e.g. Tron and Bittorrent).
RATIONALE TUCK-IN HORIZONTAL DIVERSIFICATION
Size Small (<$10M) Large ($10M<x<$500M) All
Strategy
Acquire early stage startups
for people and tech
Merge with a company in the
same space
Acquire a company in a
different sector
Focus Talent, Technology
Market share, Geography,
Regulation
New business lines/products,
Regulation
Endresult
Team, products, brand are
absorbed by acquirer
Target company operates
standalone, or gets (partially)
rebranded
Full integration or standalone
operation
Examples
Kraken - Interchange

Coinbase - Paradex

Facebook - Chainspace
Coinbase - Xapo Custody

Circle - Poloniex

Kraken - Cryptofacilities
Tron - Bittorrent

Coinbase - Keystone

Circle - Seedinvest
120 56
34
Diversification Horizontal Merger Tuck-in Acquisition
$680
$1,371
$502
Strategic Deal Activity** Strategic Deal Value**
Strategic M&A activity
(split by deal rationale)
**Strategic Deal Activity & Deal Value are calculated using all deals
categorized as strategic deals since 2013
*Talent & Technology Tuck-Ins: https://www.theblockcrypto.com/post/25055/emilie-choi-coinbase  
https://www.businessinsider.com/coinbase-crypto-bitcoin-acquisition-strategy-emilie-choi-2018-4?international=true&r=US&IR=T

1. A framework for Decentralized M&A

2. M&A by protocol and dapp projects

3. The ﬁrst token mergers

4. Mapping deals

Decentralized M&A

A framework for Decentralized M&A:
Protocol mergers and token takeovers
The analysis so far has focused on concepts that are common in
"traditional" finance and the merger of centralized companies. In this section
we look at how cryptocurrency networks can merge.

Decentralized M&A has not happened (yet): A handful of thought pieces*
have theorized what mergers of decentralized cryptocurrency networks
might look like and the questions that arise. For example: how would a
merger of two competing privacy cryptocurrencies take shape? Or how can
a decentralized prediction market launch a hostile takeover of a competitor?
Unsurprisingly - this pure form of "Decentralized M&A" hasn't happened yet,
as many cryptocurrency networks are still early in their development and run
by centralized companies and foundations.

Crypto-native M&A concepts: However, as the current batch of
cryptocurrency networks and blockchain projects mature - and the degree
of decentralization increases - new stakeholders, concepts and mechanisms
will appear in the M&A process. We have summarized a few concepts and
mechanisms of "Traditional M&A" and speculated about their crypto-native
or "Decentralized M&A" counterparts.

Live experiments: In addition, we are seeing some attempts to put theory
into practice, as evidenced by the M&A activity by development teams and
exchange of tokens instead of equity and/or cash. We look at these
examples in the remainder of this section.
CONCEPTS TRADITIONAL M&A DECENTRALIZED M&A
Stakeholders
Shareholders, Board,
Management
Cryptocurrency/Token
Holders, Development Team,
Foundation, DAOs
Transaction Price Cash/Equity/Goodwill Cryptocurrency Tokens/Coins
Mechanism
Target shareholders receive cash
or equity from acquirer
Token mergers/swaps
Valuation Methods Multiples, Cash Flow Analysis
Realized/Future Market
Capitalization, "crypto native"
valuation techniques
Economies of Scale
& Synergies
Efficiency, Cost Cutting,
Branding, Intellectual/
Technological
Protocol Development,
(Potential) Increase in
Decentralization and/or
Security of the network
Transparency Auditor On-chain intelligence/audit
Value Maximization Fairness Opinions, Tax
Crowdsourced or
Decentralized Prediction
Markets
Hostile Takeovers &
Defense Tactics
Poison Pill
"Activist" token holders or
developers can fork the
protocol
Governance &
Regulation
Articles of Association, Bylaws
Smart Contracts, Protocol-
Level Rules
Dealmakers Investment Banks, Law firms -
*We highly recommend the following two pieces for background reading: 
- "Protocol M&A" by Ryan Selkis: https://medium.com/@twobitidiot/protocol-m-a-91a129db1fe4 
- "What the First Token Hostile Takeover Could Look Like" by Andy Bromberg: https://medium.com/@andy_bromberg/what-the-first-token-hostile-takeover-could-look-like-c40be3ccb6b5

M&A by protocol and dapp projects:
Deal types and rationale
While true "Decentralized M&A" is yet to happen, there has been significant
M&A activity from the development teams of cryptocurrency networks.
Many of these development teams aspire to create a decentralized protocol
or application and M&A can be a useful strategic tool as they seek to
transition. We have identified 3 different deal types by these teams.

1 - Development Acceleration: acquisitions by decentralized protocol
development teams. Very similar to tuck-in acquisitions these deals are
focused on talent (acquihires) and technology. We have seen a few ICO-
funded teams engage in this.

2 - Customer Expansion: acquisitions of non-crypto companies/networks
with an existing user-base. Instead of growing a user-base organically, new
users are acquired and have to start using the cryptocurrency network and/
or tokens.

3 - Protocol Commercialization: acquisitions by development teams with
the ultimate goal to commercialize their open source cryptocurrency
protocol. For example, Lightyear - an entity formed by the Stellar
development team - merged with Chain - a corporate blockchain company.
The merged company was rebranded as "Interstellar" and brings Chain's
customers to the Stellar blockchain.
ACQUIRER TARGET TYPE COMMENTS
Monster Byte Gambling platform Moneypot
Gambling
platform
Development
Acceleration
Monster Byte acquired
Moneypot and integrated
its technology, talent and
patents after shutting
Moneypot down
Chainlink Oracle network Town Crier Oracle network
Development
Acceleration
Chainlink acquired Town
Crier to integrate its
technology into the
Chainlink network.
Metal Pay
Crypto payment
application
Crumbs
Crypto mico-
investing
application
Development
Acceleration
Metal Pay - an ICO funded
company - acquired crypto
startup Crumbs in order to
add its functionality to the
Metal Network
Perlin Dapp blockchain
Dispatch
Labs
Corporate
blockchain
company
Development
Acceleration
Perlin acquired the patents
of a corporate blockchain
startup Dispatch Labs
XYO Network
Location tracking
network
GEO
Location
tracking
network
Development
Acceleration
XYO Network acquired
GEO for its talent
(acquihire)
TRON Dapp blockchain Bittorrent File sharing
Customer
Expansion
TRON acquired Bittorrent
to gain additional users
TTC
Decentralized social
network
Alive
(non-crypto)
video sharing
application
Customer
Expansion
TTC acquired video
sharing startup Alive
(outside of the crypto
space) to gain users
Lightyear
Commercial entity of
the Stellar blockchain
development team
Chain
Corporate
blockchain
development
company
Protocol
Commercialization
Lightyear and Chain
merged to form Interstellar,
a company focused on
commercial use for the
Stellar blockchain

The first token mergers
2019 saw the first cases of token mergers. After the ICO and token-sale hype
of 2017 it was a matter of time until overfunded crypto projects would struggle
with traction and look to merge with one another. We found two examples:

1. TRONAce & TRONDice: In April 2019, two gambling applications running
on the TRON blockchain - each with their own token - announced that
TRONAce had acquired TRONDice and that TRONDice tokens would be
merged/swapped into TRONAce tokens.

2. COSS & ARAX (a.k.a LALA): In April 2019, Singapore-based crypto
exchange COSS and crypto wallet ARAX announced they would merge.
Both companies had raised funds in 2017 through ICOs issuing utility
tokens. Post merger, the projects' token holders have swapped the original
tokens to a new token representing the merged entity.

Although both mergers weren't strictly speaking "decentralized" as the
projects involved were traditional companies, it is interesting to take a closer
look at how they unfolded from a token perspective. In the case of COSS-
ARAX, the amount of public information and on-chain data allowed us to take
a closer look and reflect this in the timeline on the right*.
COSS-ARAX Merger COSS ARAX/LALA
Type of business
Cryptocurrency
exchange (www.coss.io)
Company that has developed a
cryptocurrency wallet called LaLa
ICO Details Raised $3M in 2017 Raised $20M in 2017
Original Token Name COSS LALA
Price of token T-1** $0.078 $0.0025
*Due to lack of transaction data for TRONAce-TRONDice, we have only focused on COSS-ARAX 
**T-1 is the day before the deal announcement
• 24 April - Deal Announcement: 
COSS and ARAX (a.k.a. LaLa World) announce the token merger.

• 3 May: First merger proposal 
COSS and ARAX propose three different token merger structures for their users to
vote on.

• 13 May: Second merger proposal  
COSS and ARAX teams decide to scrap public vote. COSS and ARAX (LALA) token
holders will swap their tokens into a new token called ARX by depositing their tokens
on the COSS exchange. Swap ratios as follows: 
COSS : ARX = 1:1 
LALA : ARX = 10:1

• 12 June: Final merger proposal  
ARX is scrapped, new token will be called COS. Swap ratios as follows: 
COSS : COS = 1:1 
LALA : COS = 10:1

• 25 June: Start of token swap 
COSS and LALA holders have to deposit their tokens to the COSS exchange to swap
them into the new COS tokens. Swap will last for at least 3 months.

• 30 September: $1.6M of tokens swapped* 
On-chain analysis of COSS and LALA token transfers show that approximately
$1.6M of tokens were swapped into the new token (COS) by September 2019 
COSS-ARAX (LALA World) Token merger
*On-chain data was supplied by TokenAnalyst (www.tokenanalyst.io), calculations our own

Mapping deals in a centralized-decentralized matrix
Lightyear (Stellar) - Chain
"Decentralized" M&A
Protocol Mergers
Hostile Token Takeovers
Decentralized
Acquirer
Centralized
Acquirer
Centralized Target
Decentralized
Target
Chainlink - Town Crier
XYO Network - GEO
Tron - Bittorrent
Perlin - Dispatch
TTC - Alive
MonsterByte - Moneypot
TRONAce - TRONDice
COSS - ARAX (LALA)
Metal Pay - Crumbs
This graphic illustrates where the mergers and acquisitions involving protocol and
dapp development teams sit on a centralized-decentralized matrix (for both acquirer
and target). Since there is no objective measure, the scale is only relative, e.g. we
placed the TRONAce - TRONDice merger in the top right quadrant because it
involves two dapps and the mechanism used was a token merger. In comparison
while COSS - ARAX (LALA) also used a token merger mechanism, the two entities
were highly centralized. In the top-right is the hypothetical case of Decentralized
M&A where both entity and mechanism ﬁt squarely in the decentralized camp. We
leave it to the readers to consider whether the rubicon of decentralization has been
crossed, and feedback is welcome!

To summarize, we have analyzed 350 deals from
2013-2019 in order to understand what role M&A plays
within the cryptocurrency industry. Looking to the future
we have considered what "Decentralized M&A" could
look like, and assessed transactions that provide clues.
Takeaways

INDUSTRY MATURITY
FUNDING
VOLATILITY
The cryptocurrency industry hasn't been shy to engage in M&A. 350 acquisitions have taken place since 2013,
representing $4B of value. Whilst meaningful within the industry, both activity and value are relatively small
compared to the public valuation of cryptocurrency networks and M&A in other tech sectors. The
cryptocurrency space is still relatively young, and M&A activity is a reﬂection of crypto companies iterating and
using acquisitions as a strategic tool.
Most cryptocurrency companies are funded by venture capital ﬁrms. In the absence of a large IPO in the
foreseeable future, and the young vintages of most crypto VCs, M&A is not a fund-returning exit strategy
yet.
M&A activity is volatile and shows signs of positive correlation with cryptocurrency prices. The extreme price run-
up in late 2017 drove a surge in sometimes opportunistic Financial M&A. The subsequent price collapse and
recovery have created a climate in which Strategic M&A prevails.
Key Takeaways

COMPANIES & STRATEGY
DECENTRALIZATION
Cryptocurrency exchanges such as Coinbase and Kraken have emerged as the most proliﬁc strategic
acquirers in the space. Acquihires (talent) and technology focused acquisitions have been the most common
strategic type, and we expect this to continue for the foreseeable future.
True "Decentralized" M&A has not happened yet. However, development teams have been actively acquiring
companies to help them transition from a centralized starting point to a more decentralized end-state.
Moreover, 2019 saw the rise of token mergers, which could be an important mechanism in Decentralized
M&A.
There have been clear signs of exchanges using M&A to meet diﬀerent countries' regulatory requirements.
With the regulatory landscape evolving at high speed, M&A will become an even more attractive strategy for
crypto companies in their quest for global regulatory compliance.
REGULATION
Key Takeaways

‣ E-Mail: info@tokendata.io

‣ Twitter: @tokendata

‣ Web: research.tokendata.io
Contact
ABOUT US
The cryptocurrency industry needs more independent
data providers and better insights to progress. With that
in mind, we launched TokenData in 2017 as one of the
ﬁrst crypto resources providing free and unsponsored
data about all tokens and token sales (ICOs) to shed light
on the good, the bad and the sometimes ugly things
happening in our nascent industry. Since our launch we
have provided data and insights to the broader
cryptocurrency community, media outlets and other
crypto startups, and have worked for cryptocurrency
investors, venture capital funds, investment banks and
global regulators on data and diligence projects.
We'd love to receive feedback about this report, feel
free to reach out to us via any of the following
channels:
‣ Ricky Tan: ricky@tokendata.io

‣ Ralf Taner: ralf@tokendata.io
Authors

State of Crypto M&A: How It’s Shaping the Industry w/ Ricky Tan From Tokendata

Recommandé

Recommandé

Contenu connexe

Dernier

Dernier (20)

En vedette

En vedette (20)

State of Crypto M&A: How It’s Shaping the Industry w/ Ricky Tan From Tokendata