What the numbers say: M&A activity in the crypto sector surged by 10% YoY in Q1 2023, with 54 transactions recorded in the quarter, per advisory firm Architect Partners. The number of M&A transactions registered in Q1 2023 reached an all-time high, crossing the previous record of 53 transactions set in Q4 2021. Per Michael Ashe, head of investment banking at Galaxy Digital, the "active pipeline of mandates [is] representing over $1B in potential transaction value." Where to see the impact: Nearly 65% of the transactions involved one crypto firm acquiring another. Firms with surplus capital are strategically acquiring cash-strapped startups to bolster their assets. Equity stakes are a common component of M&A transactions in businesses trying to conserve cash. The majority of the M&A deals involved crypto infrastructure firms.
What's driving the change: M&A activity has risen due to the slump in VC funding for the crypto industry. VC funding for the sector plunged 80% YoY from $12.3B in Q1 2022 to $2.4B in Q1 2023. Ashe said, "Companies that would have been able to raise capital in a bull market are finding it difficult to do so now and are turning to M&A as an exit." |
