ICO Review: LEXIT
LEXIT is a decentralized marketplace for IP, copyrights, and technology from discontinued projects, as well as whole startups.
The solution that LEXIT brings about is an exciting prospect, looking to streamline the merger and acquisitions process, reducing fees as well as increasing efficiency. As there haven’t been too many other blockchain projects looking to take on an activity like this, LEXIT brings about an interesting prospect. In seeking to raise a hard cap of 30,000 ETH, here’s what we think of their whitepaper:
LEXIT believes that the mergers and acquisition market is flawed and outdated. As many businesses leave behind the technology, knowledge, and human capital with failed business attempts, they believe there hasn’t been an efficient way to find buyers who are looking to purchase these items. Furthermore, they also point out that when a buyer is found, numerous actors including corporate lawyers, bankers, advisors, and others get involved, coming in at a high cost.
The goal for LEXIT is increased efficiency and liquidity for Mergers and Acquisitions by:
- Implementing a marketplace that brings buyers and sellers together, giving them global access to assets and opportunity
- Bringing on assessors and field experts who help appraise assets
- Providing a secure, digital deal room where transactions are done quickly
- Promoting communication and extending reach with an international network of business partners.
- Utilizing blockchain for security and transparency
- Using token economics to incentivize and drive engagement
By implementing these goals, LEXIT is looking to enable M&A transactions to close more quickly while knocking the cost down by up to 75 percent. This empowers entrepreneurs to discover the true value of their assets in a dynamic and highly liquid marketplace without having to worry as much about fees.
Opportunities And Challenges
As noted by LEXIT, the current marketplace for M&A’s is somewhat tricky in regards to how both sides connect with each other. From finding a buyer/seller all the way down to when the ink is signed, this is a long and expensive process, as well as one that’s complicated in regards to ownership. However, that’s why LEXIT feels like their marketplace is the perfect solution.
LEXIT lists out a few specific challenges in the industry they believe they can help solve, including:
Barriers To Market
The mergers and acquisitions market is in need of an update, as it’s reliant on a lot of antiquated systems, as well as incurs too many steps that attach costs.
Pricing Is Difficult
One of the most challenging aspects of the Mergers and Acquisitions market is arriving at an acceptable valuation. As sellers are trying to get the highest price possible while buyers are aiming to ensure they’re not overpaying, this can be a tricky balance. Furthermore, aspects like unrealistic expectations, benchmarking too far back, and poor vision on value can all accumulate to bad deals, which LEXIT is looking to avoid.
Experts Aren’t Easily Accessible
When forming an opinion on acquiring a company, not everyone has the best access to those who can guide them in the right direction. This can lead to a process reliant on an antiquated system, as well as one that requires both parties to accept the opinion of the other’s expert.
Transactions Are Expensive
As it currently stands, closing the deal for an M&A deal can take up to two years, as well as take on fees ranging from 1 percent to 8 percent. Furthermore, when you consider that many of these deals require quite a number of lawyers, accountants, and others to get done, the final bill can make the cost of an acquisition not only hard to estimate but expensive as well.
Intellectual Property Challenges
Finally, one of the most significant challenges LEXIT aims to solve is with IP. They divide this into two categories, which are:
- Discovering Unused IP, or IP that has been abandoned.
- Valuing IP, which is difficult as it requires a deep understanding of function.
The LEXIT ecosystem is built upon a few different components, including their Marketplace and Deal Room, which is underpinned by blockchain.
LEXIT aims to be the first global marketplace for M&A, which they aim to increase accessibility for those who want to list their companies and IP. The marketplace is free to join, however, does require a small listing fee. Once a seller posts their listing, buyers can browse through offers via specific attributes such as industry or location. Furthermore, buyers can also communicate with sellers before bidding to get more information through the listing.
The Deal Rooms
Virtual Deal Rooms are secured spaces where NDAs are signed, terms are negotiated, and transactions are finalized. Since these would hold confidential information, LEXIT aims to offer a solid security system as well. LEXIT hopes to combat the power imbalance they see between sellers and buyers, where everyone has the same access and guidance. They hope to achieve this by offering a pool of experts who are on hand to participate in the Deal Room. Finally, purchase agreements on LEXIT are projected to be finalized and signed within 12 weeks, which will reduce costs and fees charged.
The Role Of Blockchain
LEXIT plans to utilize blockchain for valuations, bids, and transaction volume via smart contracts. They also look for transactional data to be tamper-proof, as well as secure and transparent. Their hope is by design; they can reduce transaction cost, as well as increase speed and logic.
LEXIT lists out the following actors as participants in their system:
Assessors, who are responsible for providing personal observations on listings and transactions. Although they need to be vetted, once they’re approved, they can select offer views, as well as assist in the way in the buying process.
Anti-Fraud Detection Team, which is provides approved assessors with the opportunity to write personal views and participate in Deal Rooms. They also will filter unwanted transactions before they are listed on the platform, as well as report fraudulent or illegal activities.
Outside Service Providers, which is a network of service providers for valuation, advisory, legal, and accounting. Outside assessors are still able to come in and submit personal views, however, cannot act in an official capacity unless engaged through a contract that’s external to the platform.
LEXIT Global Partners
LEXIT aims to build a Global Partnership Program to generate a consistent deal flow on the platform, ensuring that variety of companies are included in the ecosystem. These will consist of partnerships with accelerators, incubators, startup hubs, industry associations, venture capitalists, and M&A firms.
Finally, LEXIT currently is engaged with a number of different external companies, including SelfKey, Chainium, Metaverse, Polymath, Veriff, and Startup Bootcamp.
Overall, LEXIT is aiming to offer a marketplace that hasn’t existed before, which for that alone, might be worth the experiment. Their foundation and idea seem solid, with only a few limitations of concern. For example, their methodologies for outside service providers can cause slight concern in centralization, as those individuals have the power to confirm/deny requests. However, even with these aspects, if LEXIT can potentially deliver on their promise of implementing a Mergers and Acquisitions marketplace that will scale globally, this could be an interesting project to keep your eye on.
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