Major crowdfunding platforms abandon merger in wake of CMA review

Two major crowdfunding platforms have abandoned a proposed merger after the Competition and Markets Authority (CMA) blocked the deal over competition concerns, it has been revealed.

Crowdcube and Seedrs – who account for over 90 per cent of market share in the UK – announced in October last year that the two firms had agreed to merge in a move that would have created the “world’s largest private equity marketplace”.

These platforms work by pooling the financial resources of thousands of smaller investors – rather than a small number of larger investors – into new and innovative ideas.

According to Crowdcube, the proposed deal would have been structured as an acquisition by Crowdcube of all of the outstanding share capital of Seedrs Limited via scheme of arrangement.

However, provisional investigations carried out by the CMA found that the merger may have resulted in small and medium-sized enterprises (SMEs) and investors losing out “as a result of higher fees and less innovation”.

The regulator concluded that blocking the merger “may have been the only way of addressing the competition concerns”.

Commenting on the Phase 2 investigation, Kirstin Baker, Chair of the CMA inquiry group, said: “These are the two largest equity crowdfunding platforms in the UK, with at least a 90 per cent share of the market between them and we see them competing closely on price and innovation. This means the merger could lead to less choice and higher fees for SMEs and investors.

“We have therefore reached the view that blocking this merger is likely to be the best way to maintain competition. The decision to block any deal is not taken lightly and is only made if there is a real risk of customers losing out.”

In light of the review, both parties have now jointly agreed that they will withdraw from the process.

“We’re obviously disappointed with the CMA’s findings but we have taken the decision to terminate the proposed acquisition. However, I’d like to reassure you that it’s business as usual at Crowdcube, and we continue to focus on delivering a great experience for businesses and investors alike,” said Crowdcube in a statement last week.

Since 2011, more than £2 billion has been invested in start-up companies through Crowdcube and Seedrs campaigns, leading to the creation of household names such as BrewDog, Revolut, and Perkbox.

For help and advice with related matters, please get in touch with our expert merger & acquisition (M&A) team today.

Posted in Business, News.