Financial services firms are dashing to adopt crypto and blockchain technologies through M&A. Here are some strategies for success.
The future of money is digital.
Cryptocurrency and blockchain are rocking the foundations of financial services, unleashing vast improvements in speed, transparency, efficiency and security.
For industry incumbents, the stakes are high. The winning financial services firms of the future will be those that successfully integrate powerful cryptocurrency and blockchain technologies into their business. Firms that don’t get it right in the near time may find it hard to adopt new technology and compete effectively in the future.
With an eye on the prize, many businesses are turning to M&A to acquire the necessary knowledge and skills swiftly rather than try to build their capabilities in-house. According to a just-released KPMG report, ‘Capitalizing on the crypto and blockchain deal rush”, Crypto M&A shot up 150 percent from 2017 to 2018, and more than doubled in the first half of 2019 compared to the same period a year earlier. The report includes a detailed analysis of 117 cryptocurrency and blockchain transactions in the financial services industry between mid-2017 and mid-2019, studying deal volume, flow, size, type and outcome.
While there is no shortage of deals, however, capitalizing on these them remains a difficult challenge. Buyers need to find ways to valuate start-ups that defy traditional valuation methods. Indeed, those with the expertise to value such companies are typically employed by potential targets, rather than by potential buyers. For many financial institutions, this is unfamiliar and difficult terrain.
Further, incumbents must employ specialized valuation strategies in order to gain clarity on the potential of technologies that have not yet been commercialized on a large scale. They also need to find ways of integrating firms without losing the specialized, hard-to-replace people who made the deal attractive in the first place.
For firms to have the confidence to move forward with a partnership or acquisition, careful, vigilant dealmaking—from evaluation to execution—is critical. Here are some ways incumbent firms can take action, strategically and operationally, to gain the greatest strategic and monetary value from crypto and blockchain M&A.
As the crypto and blockchain market consolidates, mastering M&A will help your firm claim a leadership position in the new world of money. Ready to get started?
Find out more
Visit KPMG’s M&A Strategy practice to download the full report and learn how we help financial services firms develop and execute cryptocurrency and blockchain transactions that drive value to the business.