The Indian start-up and small business space is seeing increased Mergers and Acquisitions occurring. This has undoubtedly been triggered by the disruption caused due to the Covid-19 pandemic outbreak. But an interesting development that is occurring is that corporate M&A’s (Mergers & Acquisitions) have undergone immense transformation as more deals are finalising through cash transactions.
What’s the secret?
M&As are thriving due to the Indian Government’s support and their renewed perspective towards the success of such deals. Other factors that are boosting more M&A deals include the buyout occurring in the stock market as well as the stability currently seen in the banking system.
There is availability of rescue capital for credible inorganic expansions as well as confidence capital for organic exigencies, another factor that has bolstered M&As within the country. Corporates are doing promotion of ledgers, divestments, and supplementary asset disposals. This will help them get better liquidity, and stronger balance sheets. It’s also empowering them to take careful risks that will pay off on a grand scale.
Most corporate acquirers see all-cash deals as highly attractive mainly because it enables them to easily cancel out other acquirers from the competition.
Recent noteworthy M&As
Numerous cash M&As have taken place recently in the start-up and small business scene. For instance, Pine Labs, a Bengaluru-based start-up recently acquired Singapore-based start-up ‘Fave’ for a $45 M cash+stock deal. Pine Labs is a PoS (Point-of-Sales) Service provider start-up and Fave is a digital merchant start-up.
Another noteworthy acquisition has been Byju’s paying $1B for ‘Aakash’ which was a part-cash, part-equity deal. The cash transaction amounted to $600M and the rest was paid in stock.
A third acquisition of significance has been Bengaluru-based telecom start-up iBus Networks acquiring Ubico Networks in a 100% stake, all-cash deal.
Reasons for taking the cash channel
Most corporate acquirers see all-cash deals as highly attractive because it enables them to easily cancel out other acquirers from the competition.
Such offers may be preferred during an M&A transaction because may not affect the future performance of the company. Cash give-and take may also occur when shareholders are sceptical about the viability of the deal and so a premium price is offered by the acquirer.
A strong reason why cash may be swapped in exchange for stakes in a company may be because of global currency fluctuations. Currency considerations may prove to be profitable for the enquirer.
The most obvious reason may be that the company getting acquired or being merged into the acquirer may specifically request for a cash infusion.
What’s in it for me?
It is the era of start-ups, as well as a new age of cash rich companies and M&A activity is high currently. These Indian players have their eye on numerous outbound investment opportunities. These companies are mostly seasoned business houses who lack novel business opportunities.
If your start-up is struggling from the pandemic, it’s a golden opportunity for you to swap your ideas for cash deals.
Cash-rich companies are eager to buy over these ideas since they are looking to achieve quick, inorganic growth and are aggressively getting into M&A deals.