Unicorns outpace technology businesses in acquisitions

by Marie Rodriguez

The top unicorns—shorthand for startups with valuations of $1 billion or extra—in India are also the maximum acquisitive. Among different matters, it shows how a lot of these corporations have used mergers and acquisitions (M&As) to scale up hastily in a short period.

In comparison, amongst traditional era organizations in India, such offers are few and some distance among.

For instance, Quikr, the maximum acquisitive unicorn in India, has made 12 acquisitions given that 2016, in line with Tracxn, a generation statistics tracker. In evaluation, India’s biggest tech company, Tata Consultancy Services Ltd, has made only two acquisitions, consistent with Crunchbase records.

Successful acquisitions are also extra common among startups than traditional generation organizations.

In 2014, while Flipkart bought Myntra for nearly $330 million, little did the unicorn realize that its acquisition of the united states of America’s most significant on-line style retailer would bear fruit. Last 12 months, when Walmart bought Flipkart at a valuation of $21 billion, Myntra comprised $five.Five-6.Five billion of the deal price, turning into one of the maximum successful acquisitions via a unicorn in India so far.

Over the beyond four years, unicorns had been on an acquisition spree at the same time as they have been busy elevating capital. About 36 acquisitions had been made via five unicorns.

The difference lies in the size of the deals, where well-known tech companies take the lead. While there some large purchases by way of the Indian unicorns, a majority of them are inside the variety of $40-50 million or only acquire-hires, wherein a startup is bought in the main for the competencies or knowledge of its personnel and now not the products or offerings it can be offering.

Experts say startups along with Quikr, Flipkart, Paytm and OYO Hotels and Homes generally tend to acquire more significant as their corporations are purchaser-facing and rely upon again-stop technology which includes artificial intelligence, gadget getting to know and information mining that helps in boosting usage revel in. Therefore, the urge for food is to collect startups that are doing regular work in these segments.

“If you have got the IP (highbrow belongings) when you have the human assets, which might be perceived as beneficial for the acquirer, then it’s a win-win situation for both the acquirer and the acquiree,” stated Murali Talasila, partner and innovation leader at PwC India.

For hospitality firm OYO Hotels and Homes, a unicorn subsidized through SoftBank’s Vision Fund, the purchase approach is targeted at obtaining entities that assist it in enhancing its center tech and enterprise capabilities and enable marketplace share acceleration in critical markets and segments with the aid of beginning new agencies.

Since inception, OYO Hotels has finished four acquisitions, the brand new being that of Amsterdam-primarily based vacation condo enterprise @Leisure Group for $415 million, which helped the enterprise get a foothold in Europe by imparting an inventory of more than 300,000 rooms.

“Our other beyond acquisitions consist of Novascotia Boutique Homes (a Chennai-primarily based serviced condo brand), AblePlus (a Mumbai-primarily based Internet of Things technology organization) and Weddings. In (a wedding planning site) and a lot of these companies preserve to play an essential function in developing our enterprise across segments,” said Maninder Gulati, global leader strategy officer and head of worldwide houses enterprise at OYO Hotels.

Unlike within the case of M&As by way of conventional tech firms, where submit-acquisition synergies can play a massive position in possibilities of being a success, in the case of unicorns, the transaction tickets are often now not substantial sufficient to effect a company too robust, consistent with experts. “Most of the time, the acquirer and purchased are cut from the identical material,” Talasila stated. “The delta, which exists between each of them, is a good deal narrower than in the traditional tech international. You will now not listen nasty stories of an acquiree announcing the organization’s tradition is so terrible that they’ll stroll out the following day.”

But that’s no longer to mention that all acquisitions by using unicorns are a success. ANI Technologies Pvt. Ltd-owned Ola has suspended Foodpanda India’s food transport enterprise, almost 18 months after it obtained the employer. In 2016, Ola closes down TaxiForSure, a year after it received the smaller rival for $2 hundred million to hold the lead over Uber.

Experts, but, stated Ola might nevertheless be able to paintings something round Foodpanda. “Sometimes to procure just for the sake of IP… to strive things,” Talasila said. “As a new child unicorn, one wants to compete with their closest competition on every front. If Uber is doing UberEats, its closest Indian competitor can’t overlook it. They have the IP now and can launch the meals offerings in other nations wherein Foodpanda is a greater acquainted call.”

In the meantime, the M&A spree of unicorns is visible favorably with the aid of enterprise insiders, who believe this can assist the startup ecosystem.

“Acquisitions like those help in exits for both new marketers and traders, which encourage greater innovation and dry powder to traders,” said Harish H.V., handling accomplice at ECube, an environmental, social and governance fund.

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