Digital Assets and Blockchain in M&A: Due Diligence, Key Provisions, Structuring Issues

The applications for digital assets and blockchain infrastructure have expanded exponentially in recent years, resulting in a rapid increase in M&A activity in the crypto space. Investors and their counsel must understand the nuances of digital asset businesses in evaluating and structuring these transactions.

Each blockchain has standards and procedures, so buyers should carefully consider how acquired technology will integrate into their existing technology. Regulatory scrutiny of cryptocurrency and blockchain continues to evolve. Buyers should carefully evaluate a target company's past actions to identify risks of regulatory noncompliance with commodities, banking, and IP laws.

New technologies and digital assets such as NFTs can be difficult to appraise, and cryptocurrency can fluctuate wildly in value. Buyers must fully understand the value and commercial viability of the assets to be acquired. Well-crafted earnout and price adjustment provisions are critical. The buyer may also want the ability to terminate if the value of the enterprise falls below a stated threshold -- breakup fees may be heavily negotiated.

Listen as our authoritative panel discusses the complex issues associated with acquiring crypto assets and technology.