CMA blocks merger deal between Crowdcube and Seedrs

The Competition and Markets Authority (CMA) has intervened to prevent a merger between two of the largest crowdfunding platforms, Crowdcube and Seedrs, citing a potential lack of competition and loss of innovation for its decision.

The watchdog’s decision is the latest in a line of deals being investigated under increased scrutiny.

Dr Naaguesh Appadu, Researcher in the Mergers and Acquisitions Research Centre (MARC) at the Business School (formerly Cass) said the ruling should not come as a surprise.

Dr Appadu said:

“Looking at this deal from the CMA’s perspective, I would definitely have expected this decision.

“A merger in this case would lead to a 90 per cent market share, which would monopolise the industry. A monopoly brings significant market power and barriers to entry, including increased fees for small and medium enterprises, a lack of competition and less incentive for market innovation.

“There are signs that the CMA is beginning to take a tougher stance on deals. For example, Apple has very recently been the subject of investigations over use of its App Store. Previous interventions such as the decision to prevent a merger between Sainsbury’s and Asda in 2019 also show it is not afraid to take action against industry giants to preserve market competitiveness.

“The ruling leaves the two companies at a crossroads. Both have raised in excess of £2 billion since incorporation, but I believe they will need to restructure to sustain innovation and attract future investment.”

All comments should be attributed to Dr Naaguesh Appadu, Researcher in the Mergers and Acquisitions Research Centre (MARC) at the Business School (formerly Cass).