B2C2 held takeover talks with multiple buyers as valuation stalled
In brief
- B2C2 held takeover talks with multiple potential acquirers over 18 months
- Valuation in excess of $1 billion became a sticking point in negotiations
- SBI acquired its 90% stake in B2C2 in December 2020 for roughly $30 million
- Crypto market makers' revenues depend on trading flows, which weakened this year
Valuation Stalls Deal Progress
Valuation has been a sticking point in the takeover discussions, according to two people with knowledge of the talks who spoke on condition of anonymity. Discussions have centered on the sale of part or all of the company, though it remains unclear whether any talks remain active at this stage.
B2C2's appetite for a premium valuation reflects its position in the institutional crypto trading space. Founded in 2015, the firm has built a franchise around providing liquidity and execution services to institutional clients. SBI Financial Services, a subsidiary of SBI Holdings, acquired a 90% stake in December 2020 after initially investing $30 million the prior year.
Market Headwinds Pressure Valuations
The broader crypto trading environment has shifted considerably since those early SBI investments. Crypto markets have struggled for much of the year as weaker trading volumes, concerns over the economy and fading risk appetite have crimped activity. Market makers' revenues depend largely on trading flows and providing liquidity, making them acutely sensitive to volume swings.
Despite headwinds, SBI's crypto-asset business segment has remained resilient. For the fiscal year ended March 31, that segment generated 89.6 billion yen ($550 million) in revenue, up 10.9% year-over-year. The parent company has continued to expand its crypto footprint — SBI Holdings agreed last month to buy cryptocurrency exchange Bitbank for around $289 million.
Alternative Funding Routes
B2C2 explored a different path to capital last year. The firm explored raising up to $200 million from external investors. Such a fundraising would have allowed SBI to reduce its stake while providing the London firm with additional growth capital. That effort didn't materialize, leaving the takeover route as the primary strategic option on the table.
