Binance inks CoinMarketCap acquisition during a global dealmaking freeze

Global mergers and acquisitions have come to a screeching halt, but that didn't stop one of the largest cryptocurrency firms from getting a mega-deal – at least for this space – across the finish line.

I am talking about Binance's ~$400 million acquisition of CoinMarketCap, which The Block's Yogita Khatri reported would soon be announced. The deal is striking in and of itself, as it would be among the biggest deals to take place in the crypto industry. Indeed, the deal's prominence was able to siphon away attention from some coronavirus-related headlines, and it drove the conversation on Crypto Twitter with pundits coming out of the woodwork to offer their analyses on the deal. 

Still, missed in all the kerfuffle is the significance of this deal closing in this current market backdrop. As reported by The Financial Times, deal activity last week hit a mere $12.5 billion, which is the lowest amount since the peak of the financial crisis in April 2009.

"Everyone is thinking about their employees and customers first," Leon Kalvaria, chairman of the institutional clients group at Citigroup, told the FT, speaking to the decline in dealmaking. 

There have been several significant M&A casualties that are worth noting. As reported by the FT, Morgan Stanley's $13 billion takeover of ETrade and Thermo Fisher's $11.5 billion acquisition of Qiagen were slated for the first quarter. On Tuesday, Xerox announced that it had walked away from its $35 billion bid for HP, as reported by Reuters. 

CMC CZ's vision

So what makes Binance so special? There are a few points to consider. First, CZ's determination is not to be understated. Whether you agree with how he runs his business, there's no doubt that he's a hustler and moves quickly. Sources with knowledge of the deal say this was something that CZ wanted to get done. Despite not having much internal support, he brought it home.

"It comes down to CZ not caring about the current environment," one market insider told me. "He was offered to buy it by one of the founders and he took the chance. He doesn't care about the current environment because he has a long term vision."

It was also mostly an equity deal rather than a cash deal, according to subsequent reporting by The Block. Such an arrangement is easier to clinch in a down market since you don't need to take large sums off your balance sheet or borrow. As for Binance, specifically, the firm doesn't have any cash on the balance sheet as they keep nearly all of their money in BNB and BTC. 

So what's the point? The deal could be a lucrative one for Binance. 

CMC brings in a ton of traffic and is one of the most visited crypto sites, attracting a lot of non-crypto people. For Binance to keep growing as a primarily retail-driven exchange, they need a constant supply of new blood. Leveraging that traffic, Binance thinks it is in a position to build CMC and fix a lot of the issues it's become known for in the market (such as its inclusion of fake trading volumes on its site).

We will see if it works.