The UK Competition and Markets Authority (CMA) has agreed to fast track the merger of Seedrs and Crowdcube – the two largest investment crowdfunding platforms based in the UK.
The merging companies requested the fast track of the review to a Phase 2 stage last month. The CMA notes that in most merger cases, a full Phase 1 investigation is needed to determine whether a deal can be cleared or whether further scrutiny is required. However, merging companies may ask for the CMA’s review of the deal to be moved more quickly to Phase 2 where it is clear from an early stage that there are competition concerns that require an in-depth investigation.
The CMA agreed to the fast track as there is a realistic prospect of a substantial lessening of competition in the supply of equity crowdfunding platforms to SMEs and investors as Seedrs and Crowdcube dominate the market in the UK. The CMA said that it found that the merging companies would have a very high combined share of supply in the UK, and evidence from the companies’ internal documents and third parties suggest the companies are very close competitors. The CMA is therefore concerned that, if completed, the deal could result in SMEs and investors losing out as a result of fewer choices, higher fees, and poorer quality services. The merger review is now moving on to an in-depth Phase 2 investigation, which is overseen by an independent group of panel members.
By requesting a fast track, the merging companies waive the right to offer undertakings or formal commitments to address the CMA’s concerns and thereby avoid a Phase 2 investigation. Instead, if competition concerns are found at Phase 2, the independent group will set out potential options for addressing these concerns.
Andrea Gomes da Silva, Executive Director of Markets and Mergers at the CMA issued the following statement:
“Crowdcube and Seedrs are well-known names in the equity crowdfunding world and are two of the biggest platform providers in this market. Their services are used by thousands of investors and businesses, particularly early stage start-up SME businesses that tend to have limited options for raising investment. We’ve found a real risk that the merger could lead to less choice for SMEs and investors. The companies recognised that the issues in this case are complex and that the test for reference at Phase 1 was likely to be met. They therefore requested use of the fast track procedure and, after due consideration, we believe this to be appropriate.”