India close 123 M&As in 2016 – Building capabilities with global footprints

M&As in Indian Startup Ecosystem

The beginning of last week, was thrilling with tunes of excitement all around in the Start-up world. Putting an end to the several long tailed speculations, Flipkart-owned Myntra finally acquired Rocket-Internet backed Jabong in an all cash-only deal worth US $70 million. This creates a move towards biggest online fashion conglomeration in India and a world class example that elaborates on how synergies, when combined well can create a way towards successful longer-term business model.

Today, the Indian start-up scenario is at its unpredictable best. While 2015 witnessed huge funding rounds, with food-tech, hyperlocal & aggregators, in addition to e-commerce platforms, gaining edge over other segments. The year 2016 has already started with a trend towards consolidation among start-ups with much M&A action in segments like local services, eCommerce along with software-as-a-service (SaaS), and analytics.

In 2016, India has seen an unprecedented rise in M&A activity with 123 deals in total, with a cumulative deal size of 534.9 million dollars (disclosed value). The number looks exciting and signifies that there is one acquisition closure in every two days. While a bigger pie of this count resides within the domestic boundaries; this year has also explored new horizons in terms of much notified M&A activity across the foreign boundaries.

123 M&As in Indian Startup Ecosystem

The numbers include a fair combination of outbound and inbound deals, covering matured markets including US, UK, Dubai, Canada and more, thereby, constituting 9 per cent (11 deals) and 10 per cent (12 deals) to the total deal volume respectively. While most of the outbound M&As revolved around the start-up space, some of the industry majors have also realised the benefits of marrying start-ups. A few notable acquisitions include Mindtree (acquisition of US based Salesforce consulting and implementation provider, Magnet 360); Tech Mahindra (acquisition of UK based IT and digital company, Bio Agency) and Dabur (acquisition of South African cosmetics manufacturing and trading firm, Discaria). The key commonalities for inbound acquisitions include SaaS (as the top most target industry segment) and USA (as the top most acquirer location).

M&As fact-sheet in India

In domestic market, we have seen a sale season for start-ups – the industry is now showing the big signs of consolidation, with over 100 M&As till date. While, many people relate M&A activity as a pressure on the start-ups to secure their future, often, it is characterised as a vital phenomenon and survival of the fittest in such a dynamic business environment. This help acquirers to strengthen their businesses, mitigate their own shortcomings while adding on service offerings as well as leverage upon innovative capabilities in these start-ups.

Large public conglomerates are now teaming up with start-ups to expand their portfolio – Future Group (acquired FabFurnish), Titan Industries (acquired CaratLane), Yatra (acquired Mgaadi), Aditya Birla Fashion (acquired Forever 21 India).

In the start-ups space, the acquisition of CommonFloor by Quikr, at the start of the year, earmarked the beginning of all this excitement. Gradully, the year opened up itself with much heap around, with growing M&A activity month-on-month.

Several known start-ups have marked their closure with acquisition by start-up biggies. Gojavas was acquired by Snapdeal, Momoe (acquired by Shopclues), Lookup (acquired by Nowfloats), Airwoot (acquired by Freshdesk), Tinyowl (by Roadrunnr) along with recent acquisition of Jabong by eCommerce major Flipkart to strengthen the market dominance of its wholly owned subsidiary, Myntra.

Delhi-NCR remained the top location within the domestic market and snaps up 29 deals followed by Bangalore (26) and Mumbai (16) deals respectively. Bangalore has remained the top acquirer region across the geographical boundaries (including outbound M&As). Local Services remained the top segment with 15 deals followed by SaaS and eCommerce respectively.

Multiple startups (acquirer) were active more than once this year including Voonik, Girnar Soft, Craftsvilla and Quickr. Some acquired 3 to 4 startups while others acquired atleast 2 start-ups. Snapdeal acquired 2 start-ups in Gurgaon, Giftxoxo acquired 2 start-ups in Mumbai and Bangalore and Allygrow with 2 global acquisitions in Michigan & Munich each.

While the number of acquisitions and their size are both going up in India, the resulting combined entities would be able to cater the large needs of Indian population by expanding their reach in the market and even globally if they want.