Arbitrum DAO has entered on a pioneering mergers and acquisitions (M&A) pilot program. This move leverages its $3 billion treasury for growth and innovation in decentralized finance (DeFi).
The initiative, which received overwhelming approval from DAO members, highlights Arbitrum’s commitment to exploring new avenues to enhance its ecosystem.
Strategic M&A Initiative Begins
Bernard Schmid, a founding partner at Areta, is leading the eight-week pilot program. Areta provides investment banking services to crypto companies.
“In addition to conducting an in-depth strategy study on the value upside of M&A, the pilot phase should serve as a facilitated platform for in-depth discussions based on data rather than opinions,” he emphasized.
The M&A pilot will form a dedicated unit with a budget of $100 million to $250 million. This unit will identify and acquire potential targets over two years. Participants will explore the fundamentals of DAO/DeFi M&A, discuss target areas, assess risks, and develop a conceptual framework.
Assessing Arbitrum’s Financial Strength
Arbitrum, Ethereum’s largest Layer 2, possesses the second-largest Treasury among DeFi projects. financial strength positions it uniquely to explore rare M&A opportunities in the crypto space. GlobalData shows only seven M&A deals occurred in the crypto sector during Q4 2023, compared to 1,069 in the broader technology sector.
Status of M&A in Crypto. Source: Arbitrum DAO
Schmid’s vision includes acquiring technological talent and investing in complementary infrastructure to accelerate Arbitrum’s strategic goals.
“This is a largely untapped opportunity in crypto, only explored by a few different projects in the space; therefore, delving deeper into M&A would enable Arbitrum to get a jump-start on its competitors,” he stated.
However, some members of the Arbitrum community have expressed cautious optimism. Krzysztof Urbański, a delegate from L2BEAT, expressed uncertainty about whether there are sufficient M&A opportunities for the DAO to achieve the scale outlined in the original proposal.
Historically, crypto M&A has seen both successes and failures. Polygon’s acquisition of Mir and Hermez advanced its technology, showing the benefits of strategic acquisitions. Klaytn and Finschia, two large L1 blockchains in Asia, recently merged in February 2024. With a combined market cap of ~$887M and over 410,000 Web3 members, this merger positioned them as Asia’s leading blockchain by integrating infrastructure, burning 23.6% of tokens, and establishing large-scale Web3 governance. Conversely, Fei Protocol’s merger with Rari Capital was controversial, highlighting the risks.
The Arbitrum M&A pilot aims to mitigate these risks through comprehensive exploration and structured planning. It could set a precedent for M&A in the crypto sector, attracting interest from other DAOs and traditional financial institutions.