So far, mergers and acquisitions in the blockchain space have been limited; however, since the beginning of 2018, we have witnessed a significant surge in activity. Of all the deals we currently track in our M&A KnowledgeBase under the blockchain 'theme,' 30% took place between 2014 and 2017, while 70% were in 2018 – which reveals a significant uptick in activity and points to a developing market.

The 451 Take
We've seen a major surge in blockchain M&A activity in 2018 where companies are making strategic investments to boost their position in the market. Our data reveals that this activity is taking place primarily in the financial and IT industries; however, we see a growing diversity in terms of vertical markets as those realize the potential benefits of blockchain technology and identify the right use cases. In terms of regions, North America and Europe stand out. We believe that there is more M&A to come as more projects mature, which will help further legitimize the blockchain space. Also, successful exits will likely motivate early-stage venture capital investors to continue to invest in new blockchain-related projects.

Blockchain Startups are Making Acquisitions Despite Risks
Our data shows that a growing number of well-funded blockchain startups are making acquisitions to boost their market positions. These acquisitions come with risks because many of these startups have yet to prove themselves. Nevertheless, rising M&A activity shows that investors believe that future returns will make up for these risks.

Cryptocurrency exchange Coinbase, in particular, has made nine acquisitions between 2014 and 2018 – the latest one being San Francisco-based digital identity startup Distributed Systems. Earlier this year, Coinbase hired former LinkedIn M&A head, Emilie Choi, to run the company's M&A activities, strategic investments and partnerships. Coinbase's primary focus has been on 'acqui-hiring,' which means that it has purchased startups essentially to acquire people in order to fill key positions.

In terms of strategic acquisitions, TRON Foundation, a startup dedicated to building the infrastructure for a truly decentralized Internet, has acquired major peer-to-peer network operator BitTorrent to create the world's largest decentralized ecosystem. We believe that this is a strategic transaction by which TRON expects to grow its user base and spur the adoption of its TRX tokens.

Another example is Lightyear Corporation, a universal payments network leveraging the Stellar open financial protocol, which announced a couple of months ago the acquisition of blockchain startup Chain and the creation of a new entity called Interstellar with which it seeks to accelerate the adoption of blockchain in the corporate world.
Vertical Markets
Although finance and IT ('general' or 'horizontal') are the leading markets in terms of blockchain M&A, there are a handful of deals that took place specifically in the digital content, media and entertainment space, according to our data. For example, Spotify acquired decentralized database technology provider Mediachain Labs in 2017 and Ticketmaster announced the acquisition of blockchain-enabled mobile ticketing software provider Upgraded Inc in October.

Nevertheless, this industry is not the only one that has identified the potential of blockchain technology, and we should see more M&A diversity in terms of vertical markets – we can find deals in the healthcare sector, for example. Healthcare blockchain startup Health Wizz acquired blockchain-based medical records management and interoperability provider kreateIoT in 2017, and the acquisition of healthcare blockchain startup Dovetail Lab by healthcare IT provider EMIS Group was announced earlier this month.

Regarding geographies where the acquiring companies are headquartered, the leading region is North America (79%), followed by EMEA (16%) and Asia Pacific (4%). When it comes to the location of the target companies, the order remains the same, but the distribution changes – NA 68%, EMEA 27% and APAC 5%. This 'ranking' is consistent with the overall distribution of blockchain vendors and startups in the different regions. North America has currently the largest share on account of the presence of leading market players and investments for the development of blockchain technology. The Middle East, in particular, is likely to adopt blockchain technology fast, with the United Arab Emirates (UAE) leading the way in the region. We also expect APAC to witness significant growth in terms of blockchain technology adoption.

Csilla Zsigri
Senior Analyst, Blockchain & Distributed Databases

Csilla is a senior analyst for 451 Research’s Data, AI & Analytics channel. She currently focuses on decoding the blockchain market to help replace confusion and complexity with an examination of the technology, the competitive landscape and available solutions that are driving the market, as well as real-world use cases and deployments.

Garrett Bekker
Principal Security Analyst

Garrett Bekker is a Principal Analyst in the Information Security Practice. He brings a unique and diverse background, having viewed enterprise security from a variety of perspectives over the past 16 years. Garrett spent over 10 years as an equity research analyst at several investment banking firms, including Merrill Lynch, where he was the lead enterprise security analyst, in addition to covering infrastructure software and networking companies.

Keith Dawson
Principal Analyst

Keith Dawson is a principal analyst in 451 Research's Customer Experience & Commerce practice, primarily covering marketing technology. Keith has been covering the intersection of communications and enterprise software for 25 years, mainly looking at how to influence and optimize the customer experience.

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