UK Competition And Markets Authority Blocks Crowdcube And Seedrs Merger

• Published date: 01 April 2021
• Subject Matter: orporate/Commercial Law, Anti-trust/Competition Law, M&A/Private Equity, Antitrust, EU Competition
• Law Firm: Duane Morris LLP
• Author: Mr Samuel J. Pearse

Crowdcube and Seedrs today announced that they have terminated their proposed merger (Crowdcube and Seedrs abandon merger during CMA investigation). It remains to be seen what the consequence of the failure to merge will be for each company.

Background

The merger was announced on 5 October 2020, subject to clearance from the UK's Competition & Markets Authority (CMA). The CMA launched its merger inquiry on 22 October 2020, utilising a fast track procedure to shorten Phase 1 of the inquiry and move to the Phase 2 of the investigation on 12 November 2020. The dedicated page for the inquiry can be found here.

CMA Findings

On 24 March 2021 the CMA published their provisional findings, in which it was stated that the proposed merger "may be expected to result in a substantial lessening of competition (SLC) within the supply of equity crowdfunding (ECF) platforms to SMEs and investors in the UK." (notice of provisional findings), with attendant risk of a lack of choice and increased costs. Although the findings are provisional the parties have elected to terminate the merger.

Since their formation, both platforms have become leaders in helping emerging companies secure crowdfunding and follow-on funding rounds. The CMA found that their offerings were near-identical and between them they accounted for 500 equity raises in 2020, of which almost half were at the seed level. Of those raises, Seedrs accounted for between 50-60% and Crowdcube accounted for 40-50%. The provisional finding was that the merged entity would have a combined share in the supply of equity crowdfunding platforms of 90-100%. At that level, the findings are not...