The UK’s two biggest crowdfunding platforms said they have decided to call off their $190m (£138m) merger a day after the country's competition regular said blocking the merger may be the only way of addressing its concerns.
The Competition and Markets Authority (CMA) said on Wednesday it had found that the proposed merger between Crowdcube and Seedrs would reduce competition and innovation.
Seedrs chief Jeff Kelisky said "we fervently disagree with the CMA’s view, but given the low likelihood that they will change their mind at this point, we have concluded that it does not make sense to continue the battle."
"We believe strongly and unreservedly that this merger would have a highly positive outcome for British small businesses, helping to provide vital funding for thousands of ambitious companies in the future," he said.
He added that the company had prepared for this possibility, and has agreed a new funding round for the business "to return to our pursuit of major growth initiatives." Details of the round are forthcoming.
Meanwhile Crowdcube said it was "obviously disappointed" with the outcome.
WATCH: The Real Estate Crowdfunding industry
Kirstin Baker, chair of the CMA inquiry group, explained that "investment in small and growing businesses is vital to the UK economy as we emerge from the coronavirus pandemic, and we have given this deal careful consideration."
"These are the two largest equity crowdfunding platforms in the UK, with at least a 90% share of the market between them and we see them competing closely on price and innovation. This means the merger could lead to less choice and higher fees for SMEs and investors," she added.
The CMA further said that Crowdcube and Seedrs compete closely against each other to win the business of SMEs, with a significant number of businesses viewing equity crowdfunding as their only way to secure financial backing.
It believes a deal between them could result in UK SMEs and investors losing out as a result of higher fees and less innovation.
The deal would have brought together the UK’s two main crowdfunding platforms. Both have long vied for the title of the UK’s biggest and have long been seen as close competitors.
In October last year, the chief executives of both companies said their planned combination would allow them to supercharge growth and that it was not about weathering the COVID-19 crisis.
“The purpose of the merger is growth,” Kelisky had told Yahoo Finance UK. “It’s not harvesting, it’s not consolidation. It’s absolutely about the growth opportunity that we feel is untapped.”
WATCH: What is the budget deficit and why does it matter?