Seedrs and Crowdcube warn businesses will suffer if CMA blocks merger
Seedrs and Crowdcube have warned their platforms could be forced to close and businesses would lose a route to funding if the Competition and Markets Authority (CMA) blocks their £140m planned merger.
The platforms unveiled plans to merge in October, subject to regulatory approval, saying the deal would create “one of the world’s largest private equity marketplaces”.
The CMA fast tracked its inquiry into the merger to a full investigation in November.
In its issue statement in December, the competition watchdog warned the merger may result in a reduction in competition in the supply of equity crowdfunding platforms to small- and medium-sized enterprises (SMEs) and investors.
Seedrs welcomed the opportunity to engage with the CMA and said it believes the merger would not reduce competition but is likely to make the market more competitive.
Read more: Seedrs and Crowdcube: A P2P history
“We are now at a crossroads,” Seedrs said in its response to the CMA’s investigation.
“Over the next few years, equity crowdfunding in the UK could thrive as an increasingly effective competitor against venture capital firms, angel investors, corporates and other established (Goliath) firms, providing more benefits to more SMEs and investors across the country.
“We have chosen to pursue the merger because we believe that doing so is the best way of making that future a reality. But equity crowdfunding could just as easily go the other direction.”
The statement warned it was harder for each platform to grow sufficiently on its own.
“Stymied by the need to drive for materially greater scale and the disaffection of the capital providers who have run out of patience for supporting that drive, one or both major firms in the segment will exit, and the opportunities for SMEs and investors will at best be far reduced from what they could have been, and at worst they will evaporate entirely,” Seedrs added.
“In the absence of the merger, this is the future that will materialise.”
Crowdcube said the merger would not lead to a drop in competition.
The platform said there are a wide range of equity financing methods and options for all SMEs at all stages of growth and it competes at least as much and probably more with other types of equity finance provider than with Seedrs.
Read more: Seedrs surpasses £1bn in total investments
“In order to achieve its objectives, it was necessary for Crowdcube to start with relatively small deals in order to develop the concept of crowdfunding and its operation in the UK,” Crowdcube said in its response to the CMA.
“However, it is not sustainable absent the proposed merger for Crowdcube…
“The proposed merger will result in no substantial lessening of competition because competition in this market is intense, and the merged entity will continue to face strong competitive constraints from incumbent forms of equity finance provision including venture capital firms and business angels.”
Seedrs and Crowdcube have both hosted many fundraising campaigns for peer-to-peer lending platforms such as Assetz Capital and Mintos.
