Given the rise in prices, it won’t be long before we see
M&A transactions in crypto, says one lawyer. Here’s how to
think through the issues.
The idea of using cryptocurrency as the means of payment in a
merger or acquisition (M&A) will give most business people
– and their lawyers and investment bankers – nightmares
and cold sweats. But given the accelerated pace of adoption
and the rapid, recent price surge in many currencies, it’s only
a matter of time until we see some buyers and sellers rolling the
dice on this approach to making deals.
While the widespread use of this practice is not even on the
horizon, the question is when, not if, a few bold souls make news
(and possibly history) by using cryptocurrency as payment in a
M&A deal. (Based on published reports, a few have already tried this, albeit
on a much smaller scale and before cryptocurrency was on the radar
of global finance.)
As background, in most M&A deals there is a time delay
between when the deal is signed/announced – i.e., when the
deal value is largely fixed – and when it is closed. If the
deal value is expressed as a cryptocurrency, the actual value
(based on changes to the crypto/fiat currency exchange rate) may
fluctuate significantly during this sign-to-close
period.
Here are a few ways dealmakers are likely to solve for
this.
Collar it
Parties can put a collar around the exchange rate of the
cryptocurrency to be used in the deal to provide parties with…
