Crowdcube and Seedrs will merge. A new chapter for the private equity industry?

Nothing will be the same. The mantra of the last months has been that the Covid-19 pandemic has changed and will continue to change the world. The crowdfunding industry is not immune as early this morning two of the leading players in the equity segment announced they will merge.

In a press release, Crowdcube and Seedrs stated that the move aims “to deliver new innovations and products that will make it significantly easier, more affordable and valuable for ambitious businesses to raise growth finance, and investors will have an even greater selection of investment opportunities with richer investment tools.”

The merger will be structured as an acquisition by Crowdcube of all of the outstanding share capital of Seedrs Limited via scheme of arrangement. Existing Crowdcube shareholders and option holders will own 60% of the combined company, and existing Seedrs shareholders and option holders will own 40% of the combined company. The merger ratio reflects the approximate valuations of the two companies based on each of their most recent fundraising rounds.

On completion, Jeff Kelisky, Seedrs’ CEO, will serve as CEO of the combined company, and Darren Westlake, our CEO and co-founder, will serve as Executive Chairman. The management team will include key leaders from both businesses.

Darren Westlake, CEO and co-founder of Crowdcube, commented: “Equity crowdfunding has redefined how many ambitious businesses raise investment and engage with their customers. Today’s agreement is an incredibly exciting milestone that will benefit high growth businesses, their investors who believe in their vision and the wider entrepreneurial ecosystem that supports them. Together with Seedrs, we can accelerate plans to further expand in the UK and overseas, launch innovative new products and improve our customers’ experience.”

Jeff Kelisky, CEO of Seedrs, said: “We are both fintech pioneers that have challenged the landscape of capital raising in Europe, building marketplaces for private equity investment. We believe that you need to be a player of greater scale to serve companies and the investors who support them. Now is the right time to bring our strengths together, in order to meet our common mission to deliver a step change in the accessibility and efficiency of private company investing. This will not only create value for ambitious companies and their investors, but also for the economies and communities that they serve. As we look to the future, we’ll be well positioned to build on our combined strengths and create a powerful global private equity marketplace that will transform the ecosystem of equity finance globally.”

The announcement is big news for the industry but comes with no surprise. In the current climate where the market is in contraction and operations ask to be cost-effective, mergers are the way to cut costs whilst developing business activities by complementing each other strengths.

The question is whether the process will be successful or not, a thing which constitutes the real challenge for this kind of operations: different cultures, different views of the business, different operational procedures, different models, different customer bases and so on. Will they integrate successfully?