Think next roundtable report india m&a product industry monitor

India Technology Product M&A
Industry Monitor
June 2015

2Think Next Roundtable Report - India Technology Product M&A Industry Monitor
Summary
• India had 190 Product M&A inbound & domestic transactions totaling $2.3B from 2011-15 YTD
– Domestic transactions accounted for 72% of overall M&A deals by volume
– “Inbound” M&A transactions were predominantly in B2B software (53%), whereas the leading sector for domestic M&A transactions was
Internet & Consumer and E-Commerce (60%)
– The average transaction size was $11.3M, far lower than that of Israel ($113M) and the US ($57M)
– 2014 witnessed the highest number (61) of M&A transactions in the past 5 years
• 2014: The India Consumer Sector is coming of age
– 300M+ internet users today (2nd Highest, India surpassed US last year!); 15-20M users transacting online
– VC/PE investments in E-Commerce/Consumer Internet space saw 101 deals totaling to $4.2B in 2014. New-age and alternative investors
(PE & Hedge funds) are rapidly buying into the India growth story;
– Consolidation in E-Commerce/Consumer Internet is picking up: >90% of deal volume and deal value during the 2014-Q115 time period in
E-Commerce/Consumer Internet was domestic in nature
• Discovery & Readiness continue to be challenges for M&A in India
– Most Indian startups are still not on the radar of the US companies for Business Partnerships and M&A
– Several transactions fall apart due to lack of readiness and inexperience with the process itself
• Future Trends and Predictions
– India’s large ‘Unicorns’ will aggressively pursue acquisitions to beef up key areas, including Mobile, AdTech, Data Science, Marketplaces ,
Merchant acquisitions, Payments and Logistics
– Acqui-hires will continue due to shortage of iOS/Android engineers & Data Scientists

VC/PE Funding is a strong source of Growth Capital for Indian Technology
Product Companies
28 31 29
49
22
81
95
74
101
74
20
21
20
26
31
0
40
80
120
160
200
2011 2012 2013 2014 YTD 2015
#Deals
B2B Software Internet & Consumer / E-Commerce Mobility
99 143 171 377 248
555 603 808
4,209
1662
316 55
42
297
192
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2011 2012 2013 2014 YTD 2015
USDMn
B2B Software Internet & Consumer / E-Commerce Mobility
India VC / PE Investments: Deal Value
India VC / PE Investments: Deal Volume  Investment in has grown by
~ between 2010-2014;.
 was invested in this sector in 2014 alone, with the two
main companies (Flipkart & Snapdeal) accounting for > 50% of
the Indian internet investment dollars
 Investments in showing an upward trend
~$1,910 M ~$1,111 M ~$652 M
~$300 M ~$123 M ~$113 M
Marquee PE/VC Investments Between 2014 And Q1 2015
Source: Signal Hill analysis and research, Venture Intelligence, YTD as on March 31, 2015

… With a fear Of missing out, Hedgies & PEs are funding ‘new’ Series B ($10-25mn)
and Series C & D ($20-250m) onwards, fueling a frenzy in valuations
1 Year
1-2
Years
1-2
Years
1-2
Years
1-2
Years
0.5
Year
0.5-1
Year
0.5-1
Year
0.5-1
Year
0.5-1
Year
2x Money Raised in Half the Time
before
Currently

New Age and Alternative Investors are making a beeline to India…
The Early Risers With Long Term Commitment To Tech Investing In India
Buoyant Market Conditions : Many Hedge Funds & Family Offices Buying Into India Internet & Software
DST Global

M&A has picked up considerably in E-Commerce & Consumer Internet Space
Acquirer Target & Description Deal Value ($mn)
Freecharge*
Online mobile recharge
400
AdIQuity Technologies
Mobile Ad Network
NA
Taxi For Sure
Mobile app for taxi bookings across cities in India
200
Babyoye
Onlline retailer of kids and baby products
NA
Wishpicker
Online gift shop
NA
Gaadi.com
Online new and used car & bike portal
NA
Myntra
Online fashion retailer
370
CouponDunia
Online discount coupons aggregator
NA
ngpay
Mobile payment platform
NA
Travelguru
Online hotels and holidays booking website
15
Letsbuy
Online electronics retailer
25
*Snapdeal / Freecharge transaction happened post Q1 2015 and is not included in the analysis on slides 11-14

Global Technology Majors have started looking at India, mostly for Technology
and Talent acquisitions
Acquirer Target & Description
Zipdial
Mobile marketing and engagement platform
BookPad
Online document creation and collaboration software
Little Eye Labs
Mobile app analysis tools for app developers and testers
Dexetra
Mobile app with Contextual Recommendations
Talent Neuron
Market Intelligence Tech Tools based on data-analytics
Impermium
Cyber Security
KDK Software
Software solutions for payroll processing, personal finance, and tax
preparation and filing in India
Redbus
Online bus ticketing website

Overall M&A exit value of Indian Technology Product Companies is significantly
below key Peers, and VC/PE’s have large Exit Backlogs…
Source: Signal Hill & iSPIRT analysis and research, Venture Intelligence, PwC, NVCA US
Technology Product
VC/PE and M&A
2011-2014
VC / PE Investments – Volume
VC / PE Investments – Value
M&A - Volume
M&A - Value
M&A Value: VC / PE Value
Average M&A Deal Size
Product M&A - Challenges and Bottlenecks continue to exist……
 Limited sales traction in back yard (US, Europe) of Software /
Internet majors; Most start-ups don’t show up on the radar of
acquirers
1
 Lack of listed Software / Internet Peers in India to benchmark
against and sluggish & nascent Software / Internet IPO market
in India
2
 Low maturity levels in product management & marketing
 Companies and entrepreneurs need to focus on building a
globally differentiated proposition and ensure global
accounting & governance standards to ignite M&A deal flow
3
4
 Nascent local acquirer universe; “US / Global Acquirer” is
required to create a block buster outcome
*only includes disclosed deal values.
^Slightly understated for US as the M&A value only includes disclosed deal values

India Technology Product M&A : 2011 – YTD 2015
Product M&A Deal Volume (Cumulative) : 2011 – Q1 2015 Product M&A Deal Value (Cumulative) : 2011 – Q1 2015
29%
36%
14%
7%
14%
31%
31%
23%
5%
9%
- Internet & Consumer accounted for 36% of deals in India and represented 31% of the overall deal value
- Domestic M&A transactions have been mostly in the Internet/Consumer and E-commerce space, whereas
the inbound M&A deals have predominantly been in the B2B Software area
- Volume of M&A in mobile has increased from 9% in 2010 - Q1 2014 to 14% in 2011 - Q1 2015 period
AdTech & Marketing AutomationB2B Software Internet & Consumer E-Commerce Mobile
Source: Signal Hill & iSPIRT analysis and research, Venture Intelligence, YTD as on March 31, 2015

Inbound and Domestic Deal Volume Split by Sectors (Cumulative 2011 – YTD 2015)
Domestic M&A Transactions accounted for 72% of overall Deals by Volume and
51% by Value..
53%
19%
4%
8%
17%
Inbound (Total 53 Deals)
20%
42%
18%
7%
13%
Domestic (Total 137 Deals)
54%
31%
1% 9%
6%
Inbound (Total ~$1.12b)
10%
32%
44%
2% 12%
Domestic (Total ~$1.15m)
Inbound and Domestic Deal Value Split by Sectors (Cumulative 2011 – YTD 2015)
Ad.Tech & Marketing AutomationB2B Software Internet & Consumer E-Commerce Mobile
Ad.Tech & Marketing AutomationB2B Software Internet & Consumer E-Commerce Mobile

10 14
9
19
3
8
10 18
26
6
5
9 3
4
5
4
6
3
1
3
4
6
11
3
0
10
20
30
40
50
60
70
2011 2012 2013 2014 Q1 2015
#Deals
B2B Software Internet & Consumer E-Commerce Ad.Tech & Marketing Automation Mobile
Product M&A Deal Volume Trend : 2011 – Q1 2015
13 11 10
18
1
17
32
29
43
16
0
10
20
30
40
50
60
70
2011 2012 2013 2014 Q1 2015
#Deals
Inbound Domestic
Product M&A Deal Volume Trend : 2011 – Q1 2015
Product M&A Deal Volume Trend by Segment: 2011- Q1 2015
- 2014 witnessed highest product M&A ever, in
terms of both volume & value of transactions
- 67% of product M&A transactions in 2014
were domestic and 33% were inbound
- Internet & Consumer sector comprised 43% of
product M&A transactions volume in 2014, of
which majority was domestic
- B2B Software followed Internet & Consumer
sector with 31% share in volume terms, of
which majority was inbound
- % Increase in transaction volume between
2013 and 2014, by key subsectors:
 Mobile: ~100%
 B2B: >100%
 I&C: ~44%

Product M&A Deal Volume: Inbound & Domestic Deep Dive (2011 – Q1 2015)
Product M&A Inbound Deal Volume Trend : 2011 – Q1 2015
Product M&A Domestic Deal Volume Trend : 2011 – Q1 2015
Inbound M&A Volume in 2014 :
- 61% transactions were in B2B Software
sector, with Mobile and Internet &
Consumer sectors comprising 17% & 22%
respectively
- Almost 2x increase in inbound deals for
B2B over 2013
Domestic M&A Volume in 2014 :
- 53% of the domestic M&A transactions in
2014 were in the Internet & Consumer
sector, followed by B2B Software sector
with a 19% share
- Majority of these domestic M&A were
acquihires by larger E-commerce players
3
9
4
8
3
6
7 16
23
6
3
9 3
4
5
3
4
2
1
2
3
4
7
2
0
10
20
30
40
50
2011 2012 2013 2014 Q1 2015
#Deals
7
5 5
11
2
3 2
3
2
1
2
1
1
1
2
4
10
4
8
12
16
20
2011 2012 2013 2014 Q1 2015
#Deals

13
605
69
233
184
30
22
136
76
637
283
0
100
200
300
400
500
600
700
800
900
2011 2012 2013 2014 Q1 2015
USDMn
Inbound Domestic
- Of the $2.3B worth of M&A in 2011-Q1
2015, domestic transactions comprise
51% whereas inbound transactions
comprise the remaining 49%
- Value of the product M&A transactions in
2014 increased over 2013 by 165%
- Product M&A activity in 2015
commenced on a high note with Q1
recording over $313M in transactional
value, which is approximately 38% of
total M&A transactions value in 2014
- E-Commerce transactions shot up in
2014, increase from 3% in 2013 to 48% of
total M&A value
Product M&A Deal Value Trend: 2011 – Q1 2015
Product M&A Deal Value Trend : 2011 – Q1 2015
Product M&A Deal Value Trend by Segment: 2011 – Q1 2015
48%
26%
39%
29%
1%
35%
4%
50%
13% 70%
2%
31%
3%
48%
13%
14%
11%
1% 1%
1%
28%
6% 9%
16%
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 Q1 2015

Product M&A Deal Value: Inbound & Domestic Deep Dive (2011 – Q1 2015)
49%
64%
49%
81%
38% 4%
43%
14%
13%
32%
7% 5%
100%
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 Q1 2015
B2B Software Interenet & Consumer / E-Commerce Others
Estimated Product M&A Inbound Deal Value Trend : 2011 – Q1 2015
Estimated Product M&A Domestic Deal Value Trend : 2011 – Q1 2015
Inbound M&A Value in 2014 :
- Out of $179M inbound M&A in 2014,
software was >80% which is a substantial
increase from 49% in 2014
- Internet & Commerce / Ecommerce share
dropped from 43% in 2013 to 14% in
2014
Domestic M&A Value in 2014 :
- Domestic M&A was dominated by Mobile
as a result of several small acquihires
- Internet & consumer continued to
dominate the value, a trend started in
201325%
7% 7%
14%
1%
41%
51%
84% 75%
92%
34%
42%
9% 11% 7%
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 Q1 2015
B2B Software Interenet & Consumer / E-Commerce Others

15
Key Insights from Microsoft Ventures’ Think Next Roundtable
1. The India Consumer Sector has come of age
1. India has 300M+ internet users today, with 15-20M users transacting online. India surpassed US (~279M) in
Dec2014 in terms of number of internet users and is only second to China (~600M)
2. Amazon has said that India was fastest to a $1B GMV for them;
3. New investors such as Tiger, DST Global, Softbank are writing large cheques
2. Discovery: continues to be challenge #1 for India product companies for M&A
1. Most startups are still not on the radar the big US acquirers for BD and eventual M&A
2. Most of the M&A transactions are very small and are domestic (India for India transactions)
3. Entrepreneur Readiness emerging as a new focus area during the M&A process
1. Most entrepreneurs haven’t been through an M&A before, and are unsure about how to handle the process
2. For every deal that goes through, there are 4-5 others that fail because of readiness/preparation issues
3. iSPIRT offers an “M&A hotline” to entrepreneurs to provide support and advice in the event of inbound M&A
interest

16
Key Insights from Microsoft Ventures’ Think Next Roundtable (Cont’d)
4. India and China are different in the evolution of startups
1. Due to protective regulations by the Chinese government, several US companies (e.g.: YouTube and Facebook) cant
operate in China, so local companies like Baidu and Tencent can create multi-Billion $ companies
2. Chinese companies historically have cultural and language barriers to expand internationally & hence usually focus on
the domestic market. On the other hand, India has 2 types of startups: India-for-India and India for global
3. Indian companies inherently have a big advantage over Chinese firms in addressing the global market
5. Acqui-hires (acquisitions with the sole intent of acquiring engineering talent) are extremely hot
today
1. Huge shortage of big data, analytics & android/iOS engineers in the valley;
2. Obviously, VC investors are less excited about acquihires & view them as a “last option”. On the other hand, founders
view acquihires as a ‘badge of pedigree’
3. Bar is very high for startups – the entire team will go through interviews during the process, and several startups fail
this stage. An international team can expect to move to the US after the deal

17
6. A new generation of entrepreneurs coming up in India
4. Looking to build deep-tech companies based out of India, serving the global market
5. Very much vision-driven: want to change the world rather than “sell-out” early
6. These entrepreneurs are also likely to be angel investors and help other startups succeed, in parallel to running
their own firm
7. Venture economics works differently for entrepreneurs, VCs and angel investors
4. First-time entrepreneurs have a higher incentive to ‘cash out’ earlier, since they have invested a large part of their
time with limited salary
5. The VC has the opposite perspective: statistics say that only 10% of VC investments are “home runs” and return
the fund, and so the VC wants to stay longer in the companies that are potential winners
6. Angel investors should not expect to exit during series-A, and should plan to stay long term. Usually a larger
investor comes in during series-C and will buy-out the angels shares in order to obtain a larger shareholding %
Key Insights from Microsoft Ventures’ Think Next Roundtable (Cont’d)

18
Future Trends & Predictions for 2015
1. The large Indian “Unicorns” will aggressively make strategic acquisitions to beef up key areas: focus areas include
Mobile, Big Data / Analytics, Payments, AdTech, etc.
2. Technology Product M&A volumes and values will continue to increase rapidly. In B2B Software cross-border M&A
will continue to dominate transaction volumes & values whereas in E-Commerce and Internet & Consumer domestic M&A transactions
will continue to dominate
3. Significant VC/PE funds will continue to flow into E-Commerce and Consumer Internet sectors, as new alternative
investors continue to enter the market. Key sectors will include the “unbundling and sharing” economy, as well as disruptive fintech
players (payments, crowdsourced financing etc)
4. Internet of Things [IOT] will receive significant interest from VCs and large acquirers: startups looking to take
advantage of the ‘sensorification’ of various sectors, including healthcare, enterprise, wearables and industries
5. Acqui-Hires will continue to be a critical component for US and India companies: critical areas include iOS, Android
engineers and Machine Learning/Data Science experts

Signal Hill is a leading independent advisory boutique serving the M&A and private capital raising needs of growth companies. Signal Hill’s experienced bankers provide deep domain expertise and an unyielding commitment to clients in our
sectors: Internet & Digital Media, Internet Infrastructure, Services and Software. With over 600 completed transactions and offices in Baltimore, Bangalore, Boston, Nashville, New York, Reston and San Francisco, Signal Hill leverages deep strategic
industry and financial sponsor relationships to help our clients achieve Greater Outcomes®.
19
iSPIRT Foundation is an industry think-tank founded by key participants and proponents of the Indian software product industry. iSPIRT enables a strong ecosystem, connects and guides software product entrepreneurs and
helps catalyse business growth. It encourages buyers to improve performance by leveraging software products effectively. iSPIRT advises policy makers on interventions that can set the industry on a higher growth
trajectory
For questions, please contact:
Sanat Rao,
Partner (M&A), iSPIRT
sanat@ipirt.in
Klaas Oskam
Managing Director, Signal Hill India
koskam@signalhill.in
This document has been prepared by Signal Hill Capital Advisory India Private Limited (“SHI”) & iSPIRT for discussion purposes only. The information and opinions contained in this document are derived from public and
private sources which we believe to be reliable and accurate but which, without further investigation cannot be warranted as to their accuracy, completeness or correctness. This information is supplied on the condition
that SHI and any partner, employee or affiliate of SHI are not liable for any error or inaccuracy contained herein, whether negligently caused or otherwise, or for loss or damage suffered by any person due to such error,
omission or inaccuracy as a result of such a supply. SHI and its affiliates are also not liable for any loss or damage howsoever caused by relying on the information provided in this document. In particular any numbers, initial
valuations and schedules contained in this document are preliminary and are for discussion purposes only and does not constitute an opinion.
Microsoft Ventures, a global initiative by Microsoft, is a strategic partner for promising startups around the world focused on business growth and development, industrial strength technology and beautiful usable products.
Build locally, scale globally. We help smart companies take flight.
Gayathri Sharma
Head – Ecosystem Alliances, Microsoft Ventures

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