Crypto M&A Trends: An Interview with Kathryn Dodds

Crypto M&A is heating up as crypto adoption surges and institutional players consolidate their presence. To dive into the trends, challenges, and legal intricacies driving this wave, we sat down with Kathryn Dodds, a Partner at gunnercooke specializing in crypto, mergers & acquisitions, investments (including SAFEs and token warrants) and DAOs.

Q: Tell us about yourself and how you got into crypto M&A.

Kathryn Dodds: I trained as a corporate law specialist at Eversheds Sutherland, one of the 10 largest global traditional corporate law firms. As the Web3 world grew, I became fascinated by the ability to create new forms of corporate vehicles, such as DAOs. I also loved seeing how Inder Phull launched Pixelynx, a crypto collectables platform in collaboration with deadmau5 and Richie Hawtin.  It was really inspiring to see companies innovate using new technology to bring concepts into reality and I wanted to be a part of it.

I then joined gunnercooke, one of the largest global crypto law firms, when my practice expanded into crypto M&A. At gunnercooke I was able to create a genuine, client centric offering, for example by being the first law firm to officially accept payment in crypto, which is vital for true DAOs that may not be able to open a bank account. In the last few years, I am proud to have been at the cutting edge of a range of crypto M&A, including one of the first sales of a DAO, and the Bitwise acquisition of Attestant which was a leading news story at the time. 

Specializing in supporting emerging technologies such as crypto has been one of my best decisions; I absolutely love this space!

Q: What trends are you seeing in crypto M&A right now?

KD: The crypto sector remains highly fragmented, meaning it is a great opportunity for strategic consolidation through M&A.  We are currently seeing a trend towards larger Web3 firms or Web2 firms acquiring existing Web3 businesses rather than building themselves.  Currently, a particular trend is to acquire Web3 firms involved in infrastructure, such as staking platforms, due to their operational readiness. For example, Bitwise’s recent acquisition of a staking business enabled it to expand into Ethereum staking.  Other examples of sought-after acquisitions are firms with regulatory licenses or Labs entities spun off from DAOs to manage treasury assets, aligning tokenholder interests with the Labs entity. I am particularly finding that I am being brought in by firms to advise on how to make them “acquisition-ready”, particularly as larger global franchises may need to restructure to focus their value proposition so that it is attractive for buyers. 

Q: What are your top tips for teams navigating crypto M&A?

KD: Ensuring your house is in order is really important in ensuring optimal pricing.  For example, is your structure tax efficient?  Are you compliant with regulations?  Where is the IP?  Have core contributors signed up to consultancy agreements?  Making sure everything is clearly documented, the governance is clear, and the entities work together are all crucial in achieving a successful exit at optimal pricing. As mentioned above, entities with pre-existing regulatory licenses are highly desirable, as they mitigate significant compliance challenges. For sellers, it is also important to be able to translate business models in a way which is digestible for buyers that may have advisers that do not fully understand the space. Conversely, as a buyer it is vital to understand where the real risks and opportunities lie in a potential acquisition, particularly as there are important differences with traditional M&A and getting it wrong can result in owning a valueless asset. 

Q: You’re based in the UK—how’s the crypto landscape evolving there?

KD: Whilst I am physically based in the UK, the projects we advise on are always multijurisdictional in nature, and indeed we are seeing a structural divide between territories where firms operate from and where they sell into.

Often the lawyer focus is on countries to operate from, and indeed we have traditionally been involved in set-ups operating from jurisdictions such as BVI, Cayman, Switzerland and Panama. However, this approach is in some ways short-sighted, as it does not deal with the fundamental question of how to sell products into the large financial jurisdictions – so you can make a product, you just can’t sell it. 

This is where we are adding real value. Currently, our focus is on helping firms sell cross-border in a cost effective and still compliant manner. In the UK, this generally involves dealing with issues such as the financial promotion rules, which govern communicating investment activity in cryptoassets into the UK, and in the EU our focus is on MiCA, where we have used regulatory set-ups to reduce the cost of selling by up to 90% for clients. 

Moving forwards, it is going to be interesting to see how the picture evolves, particularly given the general movement on requiring greater local presence before being able to sell into jurisdictions, The overall impact of this is going to be a requirement for firms to consider how to properly set-up to maximize access whilst minimizing spend, including hidden costs such as inadvertent tax leakage. 

It is going to be a fascinating journey, and the only certainty is that there is going to be a lot of change ahead on a global level – which we are delighted to be a part of, our team having drafted around 4% of global cryptocurrency regulation across a global range of jurisdictions. 

Q: What are the biggest challenges in crypto M&A?

KD: The challenges often depend on the specific nature of the set-up. For example, if there is a DAO, securing community approval can be a major hurdle. Decentralized communities often resist centralized partnerships, which can really complicate governance votes.

Then there are tokenomics issues, like how to handle token swaps during integration, which adds another layer of complexity. Deal timelines can also be incredibly long, sometimes exceeding nine months. This extended period can really disrupt product development and marketing momentum.

Finally, balancing the interests of founders with the broader community is crucial. Any perceived self-interested actions by founders can quickly erode community trust. Plus, the tension between equity and token value allocation creates significant valuation challenges.

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Q: Why is governance so critical in crypto M&A, especially with decentralized entities?

KD: Governance is a primary concern for buyers, especially when navigating around DAOs, foundations, and centralized entities. Buyers require clarity on each entity’s responsibilities, such as the DAO’s control over the treasury and broader decisions, and the management of multisig wallets. Intellectual property ownership - spanning code, brand, or protocol - is equally vital, as are licensing agreements and revenue flows. Transparent governance structures are essential to finalizing deals for full value.

Q: How does valuation work in crypto M&A, and what role does the community play?

KD: Valuation in crypto M&A is complex due to volatile crypto asset prices, with some deals relying on average pricing models to try and spread the risk, though these are imperfect. The community is central to the value of Web3 projects, driving adoption, engagement, and long-term sustainability. Misaligned or poorly communicated deals can trigger community backlash, eroding trust and diminishing value. You’re not just buying tech, you’re inheriting a community, and losing them risks the deal’s strategic value.  We are looking at initiatives regarding a more dynamic understanding of value, such as valuation models for crypto firms that take into account factors such as the community and the impact that can have on value.

Q: What excites you most about the future of crypto M&A?

KD: What excites me most right now is witnessing the market maturing, particularly through strategic acquisitions. We're beginning to see less fragmentation as larger, more established players enter new segments, which is a really healthy sign for the ecosystem, and indeed it is really exciting advising firms on their broader acquisition strategy working alongside the new investment banks entering into the market.

A particular focus we are seeing this year is the maturation of the stablecoin concept, leading to them becoming more mainstream. I am anticipating this resulting in increased M&A activity, and it is going to be particularly interesting to see how traditional payment services firms respond to developments. In this way, we are at a more macro level witnessing the fact that, as these digital assets gain wider acceptance and utility, there is a paradigm shift in terms of traditional finance and Web3 converging. It's a fascinating time to be involved!