Business Acquisition – Dutch Uncles

Rules to Acquire – Mergers and Acquisitions in India

Aakash Sharma — Fri, 30 Jul 2021 05:35:11 +0000

Acquisitions and mergers are a major route for many start-ups, SMEs and even established companies in their business life. The origin of many of today’s most prominent companies can be traced back to this business practice – Disney/Pixar and Marvel, Exxon and Mobile, and Google and Android, among many others.

In India, various regulatory frameworks manage mergers and acquisitions (M&A) activities. The objective of these laws is to build the process of M&A more transparent so that it will protect the interest of shareholders and entities involved.

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The economic development since 1991 has resulted in a drastic change of economic environment for the commercial sector in India, enhancing the market for commercial control categorized by M&A and other varieties of corporate reformation.

Regulatory Framework for Mergers and Acquisitions

The Companies Act, 2013

The Companies Act is the primary law applicable to all companies registered in India. All business transactions, including mergers and acquisitions, must comply with the Companies Act of 2013.

Securities Laws

The securities in the Indian market are subject to the rules and guidelines issued by the Securities and Exchange Board of India (SEBI). M&A transactions are also dealt with within SEBI’s Substantial Acquisition of Shares and Takeovers amendment of 2018.

Foreign Exchange Management Act (FEMA), 1999

Foreign Exchange Management Act (FEMA) guidelines state that any exchange that intends to settle mergers in India must abide by FEMA guidelines. FEMA guidelines also require the supervision of full-time responsible persons such as administrative staff and secretaries who are members of the companies, as the companies involved in such cross-mergers have a testamentary liability.

Major technology acquisitions in recent years: Flipkart, eBay and Myntra

In 2017, Flipkart raised $ 1.4 billion from global technology leaders eBay, Tencent and Microsoft, announcing a merger with the Indian branch of eBay. eBay invested $500 million in cash and sold their business to Flipkart in exchange for an equity stake in the e-commerce giant. In addition, Flipkart acquired Myntra in 2014 for $300 million. The move consolidated Flipkart’s position in the e-commerce market and placed it on the global map of tech start-ups that “made it big.”

2021 Byju’s Acquisition Spree

Since 2020, edtech decacorn Byju’s has been on an acquisition spree. In July 2021, Byju’s acquired Great Learning, a professional and higher education company, for $600 million, and US-based digital reading platform Epic for $500 million. In April 2021, it bought out Aakash Education Services for a whopping $1 billion, affirming its space in the traditional coaching segment. Most famously, in August 2020, Byju’s bought ‘coding for kids’ edtech start-up WhiteHat Jr for $300 million.

Byju’s acquisition spree is helping the firm increase its lead over its competitors such as SoftBank-backed Unacademy, Simplilearn, UpGrad, Vedantu, Amazon Academy and traditional education institutes.

How do small businesses and start-ups get affected by acquisitions and mergers?

Many financial and business experts argue that acquisitions by big corporates exhibit their predator behaviour as they buy out the competition to maintain a monopoly. And that seems true in many cases; case in point, Facebook’s acquisition of Instagram and WhatsApp. It made Facebook the world’s biggest social media giant with transcontinental reach and access to billions of people’s data.

But in many cases, acquisition mergers are beneficial too, especially for small businesses and start-ups. When a small business gets acquired, it either gets full money for the stake or gains access to its parent companies’ vast resources while maintaining authentic leadership. There are many examples of this, like Tata Son’s multi-million stake in health tech start-up CureFit, Flipkart’s acquisition of Myntra and others. This helps the business grow and proves beneficial for both, the mega-corporate and the new company, which can now have financial stability and support to fall back on.

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Indian D2C Beauty Brand MyGlamm to Scale across the South Asian Market

Aakash Sharma — Thu, 29 Jul 2021 08:35:07 +0000

MyGlamm, a direct-to-consumer beauty brand in India that sells most of its products through its website, app and retail touchpoints, has recently raised $71.3 million in funding. Following this fundraising round, the company is aiming to scale its business across the South Asian market.

The start-up had raised $23.5 million in its four-time subscribed Series C financing round from Amazon, Ascent Capital and Wipro in March 2021. It has recently added $47.8 million as part of the round.

Darpan Sanghvi founded MyGlamm in 2017 and today also has on its board POPxo founder Priyanka Gill as a co-founder after the acquisition of ‘India’s largest digital community of Women’ in 2020. The company wants to go beyond traditional online distribution and put forth MyGlammxo as a channel to get its products.

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With WebEngage, MyGlamm currently has a 45% retention rate and is targeting Rs. 500 Crore Annual Recurring Revenue (ARR) by next year.

What propelled the creation of MyGlamm?

Started in 2017, the fashion-focused company found its roots in the goal of providing ‘glam quotient’ to its customers regardless of their busy days, without a compromise. MyGlamm is backed by one of Europe’s largest natural beauty companies, and it collaborates with international makeup artists and experts to create exciting innovations to achieve its goal of serving fashion clients with ease.

The start-up today operates as a house of brands in the beauty and personal care spaces. It works in the cosmetics, skin, hair, bath, body and personal care sectors. MyGlamm has been able to build this because the start-up is truly based on a direct to consumers (D2C) model. This allows it to communicate directly with customers. Most other firms operating in this sector are too reliant on third-party marketplaces for their sales.

How does MyGlamm plan to scale to the South Asian market?

The start-up plans to deploy the fresh funds to expand its product development, data science, and technology research teams. It is also working on expanding its offline presence and broadening the digital reach of POPxo.

By doubling down on its D2C cosmetic and personal care setup, MyGlamm plans to leverage its digital presence and community-driven growth model for global scalability. It is looking to bypass the traditional online distribution channels and offer the best products from its multiple touchpoints to consumers across the spectrum.

MyGlamm D2C – what can others learn from this upward multi-channel growth?

By its unique website portal, easy-to-use application, and an already growing offline presence via the 15000 over-the-counter sales points, MyGlamm has come a long way in acing the D2C race in the fashion industry. The start-up’s physical presence accounts for 40% of the revenue it generates today. The fact that the beauty and personal care sector remained one of the few sectors that did not face a slump during the pandemic also served the start-up’s growth.

The beauty and personal care market in India is increasing due to the boom of D2C. The industry is expected to grow with a compound annual growth rate of 4.23% between 2020 and 2025, with an estimated value of $8 billion. The rapid growth of the D2C beauty industry is in line with the growing penetration of internet services in India, the popularity of e-commerce and social trading platforms, and interactions on social media. This gives a sufficiently large base for new businesses to explore their growth avenues.

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PlaySimple The Gaming Development Startup

Vaishali Das — Wed, 07 Jul 2021 08:44:31 +0000

PlaySimple is a Bengaluru-based mobile gaming development startup, founded in 2014. With an aim to create a web of social word games, it has developed games like WordJam, WordTrek, WordTrip, solitaire and daily-themed crosswords. This is a rapidly growing and a highly profitable game studio which has established its position in the market as a leading global developer of free-to-play games.

The startup has a portfolio of nine casual games covering over 75 million downloads with 7 million active users on a monthly basis. The platform is ruled by mostly the women players covering around 80% of its total player base. It also has 1.9 million active users on a daily basis.

Swedish Gaming Firm MTG Acquires India’s PlaySimple

Sweden-based Modern Times Group (MTG) acquired PlaySimple for $360 million. This acquisition is based on the startup’s exponential growth in the fast-growing mobile words game genre in the global market. This free-to-play word games platform is an exciting new genre for MTG.

MTG, in their 100% acquisition of the startup PlaySimple, will be providing them 77% of the acquisition amount in cash and the rest of the amount will be paid in the form of MTG class B shares. Apart from the acquisition amount, there will also be performance based earn-outs of around $150 million for this Indian gaming firm.

This acquisition is one of the largest cash exits for an Indian startup after Byju’s who bought WhiteHatJr for $300 million. This acquisition is profitable for both the companies:

For PlaySimple, this will give them creative freedom and new opportunities from the GamingCo.
PlaySimple is also lined up to produce four more new games, two of which will be card games, bringing a new genre for the company.
For MTG, this acquisition will provide them to build a diversified gaming vertical with new gaming genres.
Another benefit for MTG is that PlaySimple’s impressive user base will bring more female gamers to MTG’s platform.

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Gaming startups can look for simpler ways of developing games and as PlaySimple did with their user base being highly covered with 80% of females this is indeed a great strategy to work with.

The State of Gaming Industry In India as well as In Global Market

India’s mobile gaming market is still at nascent stage, estimated to be at $40-$50 million but it has been growing rapidly at a CAGR of 50%. This is due to the rise in digital infrastructure quality and engaging gaming content.

Moreover, because of increase in the number of smartphone users, gaming developers are looking further to explore the gaming sector more. At a global level, the worth of gaming market is over $100 billion which is more than the movie and the music business combined.

What’s in it for Gaming Startups?

The major takeaway from PlaySimple gaming development firm is that they use a data-driven operating model which allows them to develop multiple games especially popular with a growing global audience of female gamers.

This acquisition of PlaySimple by MTG, marks an important step in building a diversifying gaming vertical with the top-notch companies and in return will provide a more stable business for the Swedish firm.

Gaming startups can look for simpler ways of developing games and as PlaySimple did with their user base being highly covered with 80% of females this is indeed a great strategy to work with.

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Why Are Acquisitions And Mergers Taking the Cash Channel?

Anju Nambiar — Tue, 27 Apr 2021 05:30:08 +0000

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.

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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.

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Unacademy Acquires TapChief: How Will It Change the Edtech Industry?

Aakash Sharma — Fri, 19 Feb 2021 08:35:04 +0000

Started as a YouTube channel, Unacademy became a unicorn in September 2020 as it raised $150 million due to COVID-driven growth in the Indian edtech sector. The Indian educational technology sector is poised to strengthen much more. Unacademy, India’s second-largest EdTech unicorn, is focusing on broadening its umbrella to stay relevant in the scene. The company, which began its buying spree with five acquisitions last year, announced its latest deal on Tuesday.

Unacademy has now acquired TapChief, a professional network platform worth Rs 100 crore. It has acquired a large stake in TapChief, a platform that allows businesses and professionals to contact specialists on request and provide all existing users with a point of sale. The company has more than 1.5 lakh professionals operating on the platform.

What Will Unacademy Capture with TapChief?

Over the past four years, TapChief has served over 150 business clients in areas such as education, consumer goods, e-commerce, SaaS activities, and more. The company was founded by BITS Pilani Alumni Shashank Murali, Binay Krishna and Arjun Krishna. TapChief reportedly has over 150,000 registered professionals on the platform to collaborate with experts in their selected fields and execute short-term professional projects.

Shifting Gears of Indian Edtech Sector

Indian edtech start-ups and other education sector businesses received a significant boost in 2020, with users, ratings and funding growing faster. Prominent education start-ups – BYJU’s, Unacademy, upGrad, Vedantu and others- saw their numbers soar. The future aspect of more money is driving this capital high for investors, hoping to get on the educational bandwagon’s rising tide.

Even after universities, schools and colleges reopen after the pandemic recedes, the Indian education scenario will have changed forever. Edtech companies hope to continue generating more interest among users in future. India’s education industry is poised to grow from $117 billion to $225 billion by FY25 (source: PGA Labs and IVCA). And clearly, India’s edtech companies are all pouncing on the opportunity to gain the most significant market share.

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Unacademy has acquired TapChief, a professional network platform with a base of more than 1.5 lakh professionals already operating on it.

Unacademy’s Other Major Acquisitions

Kreatyrx: Kreatyrx offers products including online test series, video courses, postal courses, and coaching classes for GATE and SSC CGL aspirants.

CodeChef: CodeChef teaches programmers to learn competitive programming.

PrepLadder: PrepLadder is an online program for medical entrance exam training.

Coursavy: Coursavy helps in preparing for UPSC CSE.

NeoStencil: An online Platform for government job exams preparation.

Edtech Boom Will Increase Employment Opportunities

Top Indian EdTech start-ups, including Unacademy, Byju’s, upGrad and Udemy, are scaling up their workforce. Combined, these edtech companies are expected to hire somewhere between 12,600-13,000 new employees in 2021. The increase in hiring for these start-ups will oscillate between 30-200%. The pandemic has accelerated the global e-learning movement, and companies believe that this growth momentum will continue in the future too.

While the sector witnessed widespread acceptance and growth in last year, 2021 will see proper quantum growth for edtech, as government policy, products, and user behaviour proceed to shift from status quo subsistence to the active seeking of new skills using technology as an enabler.

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