Seedrs-Crowdcube merger terminated over competition concerns

Posted on March 25, 2021 by Jonathan Symcox

Crowdcube Seedrs

Seedrs and Crowdcube have agreed to terminate their planned merger after it was provisionally blocked by a competitions regulator. 

Exeter-headquartered Crowdcube and London-based Seedrs are the two largest equity crowdfunding platforms in the UK.   

The Competition and Markets Authority, having investigated the proposed mergerconcluded that it would result in the combined company having at least a 90% share of an ‘important market’. 

It found that the companies competed closely against each other to win the business of SMEs, with a significant number of businesses viewing equity crowdfunding as their only way to secure financial backing.  

“A deal between the two could result in UK SMEs and investors losing out as a result of higher fees and less innovation… The CMA’s initial view is that blocking the merger may be the only way of addressing these competition concerns,” it said. 

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Jeff Kelisky and Jeff Lynn, CEO and Executive Chairman of Seedrs respectively, revealed the decision in a joint statementas did Darren Westlake, CEO of Crowdcube. 

Following on our message about the CMA’s provisional findings yesterday, I wanted to share with you that we have agreed to terminate our merger with Crowdcube,” said the Seedrs duo, who said earlier that they felt the CMA had “gotten it wrong”.  

They continued: We fervently disagree with the CMA’s view, but given the low likelihood that they will change their mind at this point, we have concluded that it does not make sense to continue the battle. 

They added that they had prepared for the possibility of the deal being blocked by raising a funding round, the details of which will be announced soon. 

In his statement, Westlake added: “Crowdcube recorded outstanding levels of growth in the last 12 months and remains in a very strong financial position following record revenue in 2020 and two consecutive quarters of profitability.  

“We continue to invest in our people and products, and we expect to be profitable again in the first half of 2021, with an unprecedented level of high-profile European businesses set to fundraise with us in the coming weeks. 

“We are excited by the growing market opportunity in the UK and across Europe and we will share further updates on our plans for the future in due course.” 

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Kirstin Baker, Chair of the CMA inquiry group, said: “Investment in small and growing businesses is vital to the UK economy as we emerge from the coronavirus pandemic, and we have given this deal careful consideration.  

These are the two largest equity crowdfunding platforms in the UK, with at least a 90% 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.” 

 

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