Quick Takes: When acquisitions fall through

What is the news?

News recently broke that Coinsquare was backing out of the CoinSmart Acquisition deal. So, what exactly happened here, and what can we learn from this?

How usual is it to see an announced acquisition fall apart?

Publicly announced deals do fall apart but usually, the circumstances are very different. It usually happens when one or both of the companies are publicly traded. The deal has to be announced and shareholders have to approve it. In this case, there is always a chance that shareholders do not approve the deal. It is far rarer though that an announcement involving two private companies will fall apart. By the time the announcement has been made, it should have been approved by both parties shareholders.

Why is this deal falling apart?

No reason has been given publicly, so these are simply assumptions.

We could imagine that the continued decline in Web3 activity has played a part. Both companies involved in this deal are smaller Canadian-focused crypto exchanges. They were combining to increase volume and market share in Canada, presumably, to get better economies of scale. It could be that with declining transaction volumes that one or two of the exchanges have seen shrinking market shares and declining revenues making the merger not as meaningful. It is also possible that one of the exchanges has been impacted by the crypto contagion or a security breach.

These are just guesses as neither party has provided a reason. 

What does this mean for each company?

Once again, it's not clear the reasoning, but there must have been a sound reason for the original acquisition. Nevertheless, it will be demoralizing and most likely financially bad for CoinSmart which was planning on getting acquired. They may have let go of employees they will now need to backfill, or they may have paused marketing and seen customers depart.

At the minimum, they have lost 4 months of leadership and momentum on growth.

What can we learn from this?

A deal is not done until all the signatures are obtained and the exchange of shares and/or money has happened.

I have seen so many founders celebrate financing or acquisition before it closes to only be disappointed when it doesn't.

The Canadian crypto exchange market is highly fragmented and seeing incredible headwinds.

Expect it to get worst before it improves.

This should not be confused with the general Web3 ecosystem which is facing headwinds but they should not be as drastic.

Our top takeaways:

• Nothing is certain until the deal is not only signed, but delivered

• There is always a chance shareholders don't approve a deal

• A deal is not a deal until it's done

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Profile: Rebecca Kacaba and DealMaker

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DealMaker is transforming the process of raising capital to simple eCommerce. Its innovative technology was designed to enable organizations to own and control exempt market raises to get the money they need, faster.

With DealMaker, brands, and founders are back in control to run streamlined, successful capital raises. To date, DealMaker has processed over $1.7B in transactions and over 650,000 investments.

What insight led you to start DealMaker?

The pain points of the capital raise process. How antiquated it was and how many founders were frustrated at how complicated it was for them to raise the capital they needed to grow their businesses.

What should people know about DealMaker? 

As Canada’s 3rd Fastest Growing Company, DealMaker has taken major market share in the US and landed clients like the NFL’s Green Bay Packers.

To date, DealMaker has processed over $1.7B in transactions and over 650,000 investments - more than any counterparts or competitor in North America.

What is the best advice you wish you gave yourself when you were starting out?

Seek feedback.

We’re hyper-focused on having meaningful conversations with our current and potential customers and system users to acquire critical feedback, which helps us improve our product, tech, and ourselves, in real-time.

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