Seedrs abandons merger plans with Crowdcube after competition watchdog blocked the planned £140m merger between Seedrs and Crowdcube over concerns it would lead to less choice and higher fees.
The two crowdfunding platforms announced plans to merge in October, saying the deal would create one of the world’s largest private equity marketplaces.
Crowdcube and Seedrs are the 2 largest equity crowdfunding platforms in the UK. These types of platforms connect SMEs looking to raise equity investment with investors willing to provide funding in return for a stake in the business.
The proposed deal would result in the combined company having at least a 90% share of this important market.
Following a request from the companies, the Competition and Markets Authority (CMA) agreed to fast-track the deal as it was clear from an early stage that the competition concerns would likely require a thorough review.
A deal between the 2 could have resulted 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.
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.”
Speaking about abandoning the merger Jeff Kelsey, CEO, Seedrs, said: “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.
However, we had prepared for this possibility, and we’re pleased to announce that we have agreed a new funding round for the business. Given the strength of the business’s recent performance, we will be able to use this round to return to our pursuit of major growth initiatives. We will share full details of the round very shortly.”