Token-Based M&A Deals Face Growing Hurdles As Crypto Firms Seek Survival Options

Token-based mergers and acquisitions (M&A) are emerging as a complex yet necessary path for crypto-native companies navigating uncertain market conditions.

That’s according to speakers at a panel discussion during the most recent Benzinga Future of Digital Assets conference. Industry leaders emphasized that while token funding provides quicker liquidity, it complicates buyouts, with valuations often plummeting during negotiations.

Token Valuations Under Pressure

Elliot Chun, partner at Architect Partners, pointed out the critical challenges firms face in token-based M&A deals, where expectations frequently clash with reality. "You better walk into that discussion knowing that your token is going to trade from zero to a 75% discount at best," Chun said. Founders often overestimate the value of their tokens, he explained, and struggle to align those valuations with potential acquirers.

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Chun noted that token holders' belief in their assets’ "special" value further complicates negotiations. When acquisitions occur, "those two facts get moved to the side quickly."

Olivier Dang, head of ventures at Laser Digital by Nomura, offered a different perspective. While acknowledging the challenges, he highlighted the benefits of token raises, calling them a faster alternative to traditional equity funding. "We're big fans of token-based fundraises," Dang said, citing their quicker liquidity and flexibility.

M&A Deals Emerging Despite Hurdles

Despite the complexities, panelists agreed that the crypto industry will likely see more M&A deals, particularly as struggling firms seek ways to survive in a competitive environment. Dang referenced the recent merger of three AI tokens—Ocean, Fetch, and Singularity—as an example of large-scale consolidations. Together, they represented nearly $4 billion in market capitalization, signaling that token-based mergers can occur even within complex governance frameworks.

Prashant Kher, senior director at Ernst & Young LLP, added that traditional financial firms, or "tradfi," may increasingly look to acquire crypto-native companies. With regulatory clarity expected to improve, larger firms are considering acquisitions to enter markets such as custody, data analytics, and fund administration. "We might start to see some of these tradfi firms acquire potential zombies at a discount or conduct acqui-hires to accelerate their move into the space," Kher said.

Pressure to Prove Viability

Chun stressed that crypto companies must prepare for multiple outcomes when raising capital. "You need to be building for, ideally, an IPO or a majority transaction," he said. Without a clear growth path, firms risk becoming what he described as "zombie companies," unable to justify their valuations or attract buyers.

The panelists emphasized that now is the time for crypto-native firms to evaluate their options as market conditions show signs of improvement. Chun urged founders to position themselves for "optionality in an upmarket," whether engaging in discussions with potential buyers or focusing on operational efficiency.

As valuations remain scrutinized and regulatory uncertainty begins to ease, token-based M&A could become a defining strategy for crypto firms seeking stability in a maturing industry.

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Image: Benzinga