"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:
- 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.
- 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.
- 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
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
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.
Flipkart or flipkart.com 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 $10 million. As it extended its pace, the
business enterprise introduced diverse classes like laptops, cameras, fitness
care, e-learning, clothing, non-public products, and domestic appliances.
- Earning customer trust
- Regular penetration in all segments
- Interest reach
- Excellent service
- Inflow of investment
Stakeholders In Flipkart
- Tiger global - 29.5%
- Inversion service - 18.4%
- Accel partner - 11.5%
- Binny Bansal - 8.7%
- Sachin Bansal - 8.7%
- Others - 23.2%
Myntra was the idea of 2 flatmates - Ashutosh Lawania and Mukesh Bansal in
Bengaluru, further 2 more founders Raveen Sastry and Vineet Saxena. Myntra was
an on demand personalization platform online for customized services where the
customers used to personalize their demands. By October 2007, Myntra were given
its first investment stated to be an undisclosed quantity from accel and Sasha
Mirchandani. As time handed the organisation acquired a sequence of fundings
from distinctive capitalists during normal intervals. In 2014, Myntra generated
an quantity of U$ 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.
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
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
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