At the end of 2021, two Defi Daos – FEI protocol and Rari Capital began – what should be a transformative fusion. The idea was simple: FEI, with its algorithmic stableecoin, would go with Rari, a pioneer in permitted loan basins, to create a defi -power center controlled by a single DAO. Their community approved the merger with overwhelming support, and in December Tribe Dao was born.

Nine months later it was dead.

The Fei-Rari collapse sent shock waves through the ecosystem, but it was hardly the only DAO M&A, even in 2021. Gnosis and XDAI (a qualified success), Aragon and VoCdoni (a Middling-Fiasko), long and cream/sushi/pickle (hard to tell) all. Since 2020, more than 65 offers have been performed by DAOs who want to scale, merge or consolidate. Today, the state of DAO M&A is more vivid than ever.

Traditional M&A has clear playbooks. Business boards are negotiating offers, investment banks structural financing and legal teams ensure compliance. But DAOs have been in operation in unprotected waters. Management is chaotic. There is no CEO to log on to an appointment, and token holders vote, often with unpredictable results. Or they learn about it after the fact that with Aragon’s community.

As we discovered by writing State of Dao M&A Report: Valuation is grim, as the DAO-tokens swings wildly, making it difficult to buy a price purchase or to satisfy the token holder’s expectations, as shown in Fei-rari and in Gnose-XDai. Regulation is a land miner. The absence of standards for legally binding DAO transactions prevents potentially valuable agreements from being implemented.

Instead, DAOS addresses token migrations and swap contracts as a solution to regulatory uncertainty. Security concerns remain challenging for DAOs as hacks can erase billions in value overnight. Just ask Feis token holders who had to cover $ 80 million in Rari utilization.

And sometimes “mergers” are not mergers at all: Lnampe Finance’s announced mergers with longing, pickle, cream, sushiswap and Acropolis were really a number of loose partnerships that produced considerable confusion over governance and responsibility.

With all that said, we think M&A can be a DAO superpower. That is, DAOS can possibly perform M& as more efficiently and recognize more synergies than any traditional organization. Imagine standardized swap and acquisition contracts, platforms for M&A discovery or protocol konomerates that create richer, more integrated ecosystems on the chain.

Despite challenges, DAO M&A is here to stay. If something, the increasing complexity of web3 ecosystems consolidates inevitable. But for future offers to succeed, DAOS must consider how they are approaching M&A. Better management of management is crucial as DAOs need a structured framework to adapt stakeholder incentives and avoid the fight that is doomed FEI-RARI.

More thought -provoking valuations are needed as a token swap is not the same as a cash purchase; Valuation models must explain token liquidity, control power and future earnings potential. Safety must be a highest priority with strict smart contract revisions and stress tests to prevent both catastrophic exploitation. And DAOs need to engage in this complex dynamic instead of waving them away and investing in the infrastructure and partnerships to perform them.

If DAOs can learn from these early experiments, M&A could become a critical tool for building resilient and scalable decentralized organizations.

But we’re not there yet. Fusion of DAOs is not just about putting together two treasuries. It is about integrating societies, government structures and technical systems in ways that improve – not undermine – the value of these organizations.

The full state of DAO M&A (February 2025) Report from Daostar, Areta and Emory University is available here.