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Flipkart and Myntra M&A
Tiger Global, Accel Partners, and Sofina Capital were common investors in Flipkart and Myntra. Flipkart acquired Myntra in a $350 million cash and stock deal in 2014. The acquisition provided strategic benefits like adding Myntra's apparel segment to Flipkart's electronics and books segments, and creating operational synergies through cost optimization and increased sales from cross-selling. Due diligence on the acquisition focused on profitability, integration costs and cultural fit to ensure synergies were realized. The acquisition was announced in January 2014 and closed in May 2014, with communication to customers, employees, and media emphasizing the complementary nature and strategic benefits of combining the two companies.
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Flipkart and Myntra M&A
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- 2. CONTENTS Deal Summary Valuation &Justification Filter Criteria Due Diligence Communication
- 3. FROM A MERGERTO AN ACQUISITION Strategic Deal - String of Pearls Buyer Seller Relationship – Mutual Consent Cash and Stock Deal - $350 Million Valuation • Positioning • Gap Filling • Diversification • Economies of Scale Rational for Acquisition • Tiger Global – US based hedge fund & private equity firm • Accel Partners – US based venture and equity firm • Sofina – Belgian based Private Equity firm Common Investors
- 4. VALUATION & JUSTIFICATION Pricepaid by the Flipkart: $350million. Share swap process: Tiger Global Management, Accel Partners and Sofina Capital get more shares in the merged entity. Price to revenue multiple: 10X times the revenues. Group No. 4 Myntra Flipkart No. of registered users 8million 18million No. of products on stock 60,000 10 million books Annualized revenues 1,200crores(approx.) 3,355crores(approx.) Myntra attained 45% of market share in fashion lines. The combination added 600 brands making effective sales 1.5billionUSD
- 5. FILTER CRITERIA MARKET SEGMENT FLIPKART Electronics, books MYNTRA Apparel (>50%) Dealwas an added vertical to the line of business Apparel business expected to grow from 3 billion to 50 billion hence a prospective sector of business SYNERGY Cost optimization – by using common resources as they have common vendors Operational synergy – by increasing market share and becoming more dominant Increasing sales – through cross selling, up selling i.e. selling apparel higher profit margin Flipkart merger – a growth merger for Myntra Launch of first online personalized style service, more brands under private labels and foraying into premium designer collection
- 6. • Legal Contingent Liabilities, Bs. Ownership and Rights • Business Profitability, Discount Structures • Strategic Integrations Costs, Cultural Fit • Operational Integration of Brands, Sales & Marketing divisions • HR Key employees, Comp. & Benefits DUE DILIGENCE FOCUS • Essential factors for benefits from synergy and strategic & competitive advantage Reason • No identifiable negotiation technique • Negotiation clause – Management role Suggested Negotiation Clause 6
- 7. COMMUNICATION Dates • Announcement –30 January 2014 • Closing – 22 May 2014 (Prior To Signing The Deal) • Reason For Gap – Negotiation Between The Companies Strategy • Optimistic Outlook Outlining The Synergies Created • Strengthen Its Position As Largest E-commerce Platform • Future Functioning Of The Companies • Designation Of Myntra CEO • Highly Complementary Nature Of Both The Companies • Catering To Rising Demand For Online Lifestyle Products • Brief On Both The Companies Addressed To Its Customers, Employees And Media
- 8. Premium The Premium Details IfPaid Has Not Been Disclosed Synergy Cost Based & Revenue Based Integration Strategy – Change Management – Change Entity – Change Integration Has Been Successful Myntra Has Been Able To Launch New And Better Products But The Bottom Line Result Is Too Early To Be Judged Upon INTEGRATION
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