In July, there were as many as 36 M&As, almost twice that in June and about three times the January and February numbers, according to data from startup research firm Xeler8. The second quarter of this year saw three big distress sales – FabFurnish, Jabong and Hiree.
Data from Tracxn, another startup research firm, also shows a significant increase from the second half of last year, when funding started slowing down. From 32 M&As in the second half of 2014, the figure went up to 67 in the first half of 2015, to 79 in the second half of last year and was 75 in the first half of this year. The data is collected based on media reports, and announcements in social media, blogs and websites.
“The trend will accelerate in the next six months,” said Mohan Kumar, executive director at venture capital firm Norwest Venture Partners. T C Meenakshisundaram, founder of VC firm IDG Ventures India, said the Uber-Didi merger in China shows the way ahead for Indian startups. “Everybody cannot create billion-dollar companies and sometimes investors don’t see value in a company when there are too many players in the sector. Exit is better than shutting down,” he said.
Another VC investor, who did not wish to be named, said that in most segments market leaders are emerging. “This was expected. Cash is air for startups. When you don’t have money to pay, employees leave and that creates so much negative sentiment in the company that entrepreneurs lose heart,” he said. While Indian startups raised around $3.5 billion in the first half of 2015, the funding dropped to $2 billion in the first half of 2016, says a report by KPMG and startup research firm CB Insights.
Xeler8 finds that the most-funded sectors and the ones that attracted the highest number of entrepreneurs – including local commerce and e-commerce – have seen the biggest consolidation. Delhi-NCR, which is estimated to have the highest number of local commerce and e-commerce startups, saw 29 M&A deals in the first half of this year, followed by Bengaluru at 26 and Mumbai at 16.
The year’s biggest acquisition was by Quikr, which bought online real estate platform CommonFloor for around $100 million, while the asking price was around $160 million. Myntra acquired Jabong for $70 million, though Jabong was once valued at more than $500 million and was demanding a price of over $1 billion for a sale in late 2014. Titan’s recent acquisition of more than 60% stake in Chennai-based Caratlane was below the jewellery e-tailer’s valuation in its last funding round from ll. Hyperlocal delivery startup Roadrunnr acquired food-tech startup TinyOwl in June after the latter found the going tough.
Rishabh Lawania, founder of Xeler8, said this trend will continue because big players are now scouting for companies that complement their offerings or add new segments that could help them with incremental growth.
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Source – ET Retail