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Regulator applies brakes to Crowdcube and Seedrs merger

After initially being fast-tracked by the CMA, it looks as if the merger between the two crowdfunding platforms will be nixed.

two men standing next to a wood fence

Jeff Lynn (right)/Seedrs

The Competition and Markets Authority (CMA) has put a potential spanner in the works for the planned takeover of Seedrs by fellow crowdfunding platform Crowdcube.

In a notice published yesterday, the CMA said the proposed merger “may be expected to result in a substantial lessening of competition (SLC) within the supply of equity crowdfunding platforms to SMEs and investors in the UK.”

The provisional findings proposed “the only effective remedy is likely to be a prohibition of the merger.” 

Following an investigation, the CMA has determined that the merger will see the new company hold a combined share of between 90 to 100 per cent of the equity crowdfunding market in the UK.

On the provisional findings of the CMA, executive chairman and co-founder of Seedrs,Jeff Lynn wrote: “The UK Competition and Markets Authority (CMA) published its provisional findings on our proposed merger with Crowdcube today, and they demonstrate that the CMA remains determined to block this transaction.”

“We are deeply disappointed with these findings, and we firmly disagree with the CMA’s view that this would be an anti-competitive transaction. We believe strongly and unreservedly that this merger would have a highly positive outcome for British small businesses, helping to provide vital funding for thousands of ambitious companies in the future.”

Both Seedrs and Crowdcube also recently said that the merger is vital to their survival.

Crowdcube also released a statement highlighting its disappointment at the findings: “The CMA has now shared its provisional findings and disappointingly raised concerns about competition and concluded that blocking the transaction may be the only way of addressing these concerns.”

The two platforms face closure unless a planned merger can go ahead, the firms warned in evidence submitted to the CMA, no doubt yesterday’s notice will be a cause for concern.

As part of the investigation, however, the CMA found that the collapse of one or both firms would be unlikely if the merger were to not go ahead and that “both parties will continue to compete to offer services for all types of SME customers.”

First announced back in October 2020, the merger turned heads in the fintech world as the two platforms are undoubtedly two of the largest crowdfunding platforms, not just in the UK, but in the world.

The two platforms have become increasingly popular with fintech firms in recent years, most recently helping to raise money for the likes of Curve,Mintos and Snoop.

Crowdcube has hosted some of the biggest equity crowdfunding campaigns in history, including Monzo’s now-infamous £20m crowdfunding effort.

The digital bank raised the cash from over 36,000 investors and, to this day, it still remains the largest crowdfunding effort in history. 

Despite the CMA applying the breaks to the merger, the regulator is still calling for those involved to submit potential solutions to the creation of a Crowdcube/Seedrs crowdfunding monopoly by 7 April 2021.

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