deals with an investment of $298 million.
But the way to such mergers and acquisitions is not smooth. “The rationale of such consolidation is a hard one, because operations are not easy to combine. You have to see the brand that your acquiring,” says Mittal. “There are numerous integration issues when M&As happen, as the e-commerce space is new in India,” adds Agarwal of Yebhi.com. But he does not see any benefit for existing investors in mergers. “Unless e-commerce firms are generating cash and have seen a break-even, there is no benefit in terms of exits for the PE firms,” he says.
A few experts feel many target firms were not bought willingly by the acquirer. “Many acquisitions have been made at gunpoint by investors,” alleges Murthy of Seedfund, saying the result is a lack of complete integration. “When Flipkart.com acquired Letsbuy.com, the former had promised no job cuts, but ultimately the latter was wiped out,” he argues.
“We see consolidation when you have got series A and B funding and post that VCs no longer see value in the scale-up. They have a particular time frame to operate in because it is not a lifelong investment and showing returns to their investors becomes crucial,” says Peyush Bansal, founder of online optical store Lenskart.com. “The investor is left with very few options to exit, like IPOs or merging the firm with another or bringing in a third investor who is willing to buyout his stake,” says Bansal. Automobile website Carwale.com was acquired by multimedia firm Axel Springer AG and India Today Group from VC firms Sierra Ventures and Seedfund.
“Other reasons for M&As are that the offer by the new investor or firm is too good or the company is not doing well and couldn’t find more investors, so it gets bought out. Many times their (investee firms) individual existence wasn’t doing any justice to the stakeholder,” says Bansal of Lenskart.com.