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Are mergers the roadmap to success for the e-commerce industry?

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Experts have long believed that 2016-17 will witness a large number of mergers and acquisitions (M&A) in the startup industry – a supposition that was corroborated with the merger of Goibibo with MakeMyTrip. Indeed, the corporate appetite for M&A has increased manifolds. The count of such acquisitions is expected to exceed last year’s numbers partly due to larger and better-funded companies such as and , which are actively seeking to make strategic purchases.

Are mergers the roadmap to success for the e-commerce Industry?
The acquisition count is expected to exceed last year’s numbers partly due to larger and better-funded companies such as Flipkart and Snapdeal, which are actively seeking to make strategic purchases

Some of these acquisitions, for instance, the recent acquisition of Jabong by Myntra have been because these companies are complementary in their nature of business, synergistic and this consolidation is for symbiotic sustainability i.e., to methodically remove the competition.

It is crucial to generate economies of scale, for example, Redbus – a part of Goibibo’s portfolio – is complementary to the MakeMyTrip portal on travel.

However, some of these mergers have earned an abundant amount of flak owing to their weak business fundamentals. Many of these startups have not seen a bottomline and don’t recognize the fact that it took companies like Amazon years to reach where they are no, which is still not a very healthy state or one that can be called enviable in any respect.

If one examines the wallet space of FinTech, servicing banks and payment wallet companies, one can easily comprehend that there are at best only two or three players that usually survive through cut-throat competition. In fact, quite a few (fin-tech startups) have even begun to explore their options.

Ventures which are able to raise series-A (funding) rounds find it difficult to raise follow-up rounds of funding which thereby leads to stress in terms of companies not having cash flows to sustain themselves.

“There will be so many deals around the corner, especially over the next 6-12 months,” said Chief Operating Officer Anurag Jain, at CarDekho, an online auto classifieds backed by Google Capital and hedge fund Hillhouse Capital (that has been on an acquisition spree the past year).

According to an investment report on Indian startups by XELER 8, a few acquisitions that emerged as the most widely speculated include Mindtree’s acquisition of Magnet 360, Tech Mahindra’s acquisition of Bio Agency and Dabur’s acquisition of Discaria.

The large-scale company acquisitions include, ’s acquisition of , Titan Industries’s acquisition of CaratLane, and Yatra’s acquisition of Mgaadi among others. A few start-ups also acquired more than one other start-up to scale their growth. One such example includes Quikr’s acquisition of online real-estate portal, CommonFloor and job portal, Hiree.

Some start-ups also closed their operations after the merger, such as TinyOwl after being acquired by RoadRunnr (now launched a platform – ), Momoe after being acquired by Shopclues among others. Also, while several start-ups’ M&A activity were related to securing their future and to keep their operations ever more strong with a healthier business environment certain others use the M&A activity to scale up their growth and include few more additions to their work model. The need of the hour is to create a more detail oriented approach and an efficient understanding of the collaboration and networking patterns of the companies for a more optimized M&A transformation.

Some experts say that this is another bubble which will burst like the earlier dot.com crisis. These M&As are indications are that everything is not pink in this world of startups.