The UK Competition and Market Authority (CMA) blocked earlier today the merger between Seedrs and Crowdcube.
According to a press release, there would be serious concerns about the entrepreneurial finance market as the economy is slowly emerging from the pandemic and a merger between the two leading equity crowdfunding platforms in the UK could harm innovation and competition.
Read also: CROWDCUBE AND SEEDRS WILL MERGE. A NEW CHAPTER FOR THE PRIVATE EQUITY INDUSTRY?
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.”
In an e-mail, Seedrs’ Executive Chairman and Co-Founder, Jeff Lynn, and Seedrs’ CEO, Jeff Kelinsky, expressed their disappointment:
“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.”
The CMA has now launched a consultation on these provisional findings and views are invited by 14 April 2021.
On our side, the move to avoid a concentration in the market represents the best way to keep the market competitive especially in a moment of great concern for the future of the British economy that is formed mainly by small and medium enterprises, which account for almost three-fifths of the UK employment and for which equity crowdfunding often represents the only way to keep their operations alive.
For more information, visit the Crowdcube/Seedrs merger inquiry web page.
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Update: 26 March 2021
Seedrs announced it will no longer pursue this plan and a new funding round.
Oliver* 