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Case Study On Merger Of Flipkart And Myntra

"Mergers and Acquisitions" is a technical term for company consolidation. When two companies merge into one entity, it is called a merger, while an acquisition refers to the purchase of one company by another, which means that instead of starting a new company, one company becomes part of another. Mergers and acquisitions are an important part of strategic management that is included in corporate finance.

The topic deals with the purchase, sale, spin off and merger of different companies. It is a type of restructuring with the aim of growing rapidly, increasing profitability and gaining more market share. Mergers and acquisitions in India are primarily governed under Companies Act, 2013 and Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 respectively.

Mergers can be divided into three types:

  1. Horizontal merger:
    It happens when both companies are in the same line of business, which means they are usually competitors. Example: Disney bought Lucas Film. Both companies were involved in production of film, TV shows.
  2. Vertical merger:
    This happens when two companies are in the same line of production, but stage of production is different. Example: Microsoft bought Nokia to support its software and provide hardware necessary for the smartphone.
  3. Conglomerate merger:
    This happens when the two companies are in totally different line of business. Example, Berkshire Hathaway acquired Lubrizol. This kind of merger mostly takes place in order to diversify and spread the risks, in case the current business stops yielding adequate profits.

The key distinction among merger and acquisition is that a merger is a shape of criminal fusion of organizations, which might be shaped right into a unmarried entity, while an acquisition happens while a organisation is absorbed via way of means of any other organisation, that means that the organisation that offered the opposite organisation keeps to exist.

In latest years, the difference among the 2 has end up an increasing number of blurred as organizations have commenced to go into joint ventures. Sometimes the acquirer desires to keep the call of the organisation being obtained as it has goodwill related to it.

Flipkart and Myntra merger case look at added the 2 largest e-tailers of India together. The merger made it feasible for each traders Flipkart and Myntra to bolster their parts. Thus, Flipkart reinforced its shape of product imparting at the same time as Myntra were given a hazard to leverage its infrastructure. Moreover, the Flipkart and Myntra merger case look at turned into involved in a imaginative and prescient to compete with Amazon.

The reasons why Flipkart acquired Myntra are:

  • The acquisition of Myntra by Flipkart allowed Flipkart to venture into the fashion space which was an untapped market by Flipkart before the entities could merge. Thus, this helped Flipkart to exploit a market which was unavailable to it earlier.
  • Flipkart had the plans to diversify its business into the fashion industry since diversification is key in achieving consistent long term growth and profitability. Diversification is crucial for companies who have their presence in mature industries where future growth is possible.
  • As Flipkart had plans to make its foray into the fashion industry, it was a cost efficient ploy to acquire Myntra, rather than building its own fashion business from the scratch. It is always cheaper for the acquirer to acquire another company instead of building a similar company on its own.
  • Since Myntra was very successful in the fashion industry and due to its competitive edge over Amazon and Snapdeal, it was an attractive buy for Flipkart.

The acquisition of Myntra made Flipkart a leader in the fashion industry. The merger of Flipkart and Myntra happened in mid- summer of 2014 when Flipkart, the biggest e-retailer announced its merger with the Indian e-commerce industry, Myntra. Myntra was its competition and a leading company in apparel and fashion.

The co-founders of Flipkart claimed that the future of fashion is e-commerce in India and Myntra has significant knowledge along with excellent team and good relation with lifestyle brands. Even after the merger, Flipkart and Myntra work as individual entities and decided to grow together as leaders in lifestyle and fashion industry.

It is vital to realise that Myntra became now no longer on the market on the time while Flipkart approached it however it became continual on obtaining handiest Myntra despite the fact that Jabong became on the market at that time. Flipkart's patience may be attributed to the reality that Myntra became ranked number one withinside the style enterprise in phrases of income at the same time as Jabong ranked range.

About Flipkart

Flipkart or become to begin with commenced via way of means of ex amazon employees, Binny Bansal and Sachin Bansal in 2007 with a complete funding of Rs. 4 lakh. Firstly, the organisation commenced via way of means of promoting books and were given its first actual order after four months.

As a result, via way of means of December 2009, Flipkart grew up as the most important bookshop in India together with which it commenced promoting exceptional merchandise as well. Further, through 2010, Flipkart commenced with cellular phones, DVD's/VCD's, etc. through March 2011, Flipkart had a GMV(gross products value) of approximately US $10 million. As it extended its pace, the business enterprise introduced diverse classes like laptops, cameras, fitness care, e-learning, clothing, non-public products, and domestic appliances.

  • Convenience
  • Earning customer trust
  • Regular penetration in all segments
  • Interest reach
  • Excellent service
  • Inflow of investment

Stakeholders In Flipkart

  • Tiger global - 29.5%
  • Inversion service - 18.4%
  • Accel partner - 11.5%
  • Binny Bansal - 8.7%
  • Sachin Bansal - 8.7%
  • Others - 23.2%

About Myntra

Myntra was the idea of 2 flatmates - Ashutosh Lawania and Mukesh Bansal in Bengaluru, further 2 more founders Raveen Sastry and Vineet Saxena. Myntra was an on demand personalization platform online for customized services where the customers used to personalize their demands. By October 2007, Myntra were given its first investment stated to be an undisclosed quantity from accel and Sasha Mirchandani. As time handed the organisation acquired a sequence of fundings from distinctive capitalists during normal intervals. In 2014, Myntra generated an quantity of U$ 150 million with 6 rounds of investment.

Myntra earned revenue worth Rs. 4-5 Crore with a customer of 150+ companies and fifty colleges. It also posted a monthly growth of 10-30% with a gross profit margin of 25-60%, varying according to the product. By 2010, the company was generating Rs. 1 crore of revenue per month. By August 2012, the founder said that Myntra had nearly 8000 transactions in a day and shipped around 11000-12000 products per day with a profit margin of about 35-40%. By the year 2012-2013 the company recorded a revenue of about Rs. 4 billion.

Return policies
Scheme and discounts
24 hours delivery system.

Structure Of The Deal

Both Mukesh and Sachin declined to share the details of the deal structure. But Sachin clearly mentioned that it was 100% acquisition and Mukesh expressed his satisfaction over the fair valuation of Myntra. Given the fact that Myntra is already valued at over $300 million, the actual number probably is in that range. Mukesh will be joining the Flipkart board and will head their fashion business.

The Merger

When the year 2014 arrived, in January the news reported that Flipkart approached Myntra for a proposal of the Flipkart and Myntra merger case study. At first, the situation was vice versa but later Flipkart changed the mind by offering a proposal to run both the entities individually. When the Flipkart and Myntra merger case study went, it was seen that the agreement would save both sides, investors, from investing in fresh capital.

Moreover, the Flipkart and Myntra merger would keep the undisputed leaders in e-commerce competing with other players like Snapdeal and amazon (opposite to Flipkart) and Jabong(opposite to Myntra). By May 2014, when the Flipkart and Myntra merger happened, of course, a reason for the stakeholders to cheer happened.

The registered users increased by 30.7%, the total number of sellers by 3.2%, daily visits by 32.6%, and also the team strength increased by 16.6%. After the Flipkart and Myntra merger the revenue increased to 1.5 billion USD. However, the financials of the company were disturbing and PAT after the Flipkart and Myntra merger case study came out to be 836.51 crores by 2015 whereas the revenues crossed the 1 billion USD line.

Myntra began out off with the personalization of products after which moved to the style industry. It changed into recognized for supplying the first-rate cost proposition to clients withinside the style industry. Its number one goal changed into to take its platform to a special degree with the aid of using being obtained with the aid of using Flipkart.

Further, this deal enabled each the groups to take advantage of their mutual synergies, i.e. superior era of Flipkart and marketplace management of Myntra to facilitate every other's increase. Therefore, this deal furnished an possibility for style and era to paintings collectively and make a contribution to every other's increase thereby making it a win-win state of affairs for each the parties.

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