The Indian market is decidedly driven more by acquisitions than mergers as companies focus on content and hire talent to expand their business rapidly, said panellists at the News Corp VCCircle Mergers and Acquisitions Summit 2017.
This is unlike the past when acquisitions were aimed mainly at getting more clients and increasing market share, the panellists said at the event in Mumbai.
The panellists’ view is in line with some recent developments where merger deals have remained inconclusive or called off.
On Monday, billionaire Analjit Singh-led Max Financial Services Ltd shelved its proposed merger of its life insurance business with HDFC Standard Life Insurance Company and beleaguered e-commerce firm Snapdeal ended its merger talks with rival Flipkart.
The panellists, which included executives from the fashion retail, e-commerce, media and entertainment industries, discussed how the merger and acquisition climate in India has shifted its focus from one dominated by volume and sales to one driven more by strategy.
“We have adopted a strategy to grow [our] business largely through acquisitions only. At Madura, we were a premium men-only company with brands such as Louis Phillippe and Van Heusen and we wanted to get into fast fashion and women’s wear,” said Rahul Desai, senior vice president, treasury and M&A at Aditya Birla Fashion and Retail Ltd. “That is when we acquired companies such as Pantaloons and Forever 21.”
Desai also said that had the company decided to grow those businesses in-house, it would have taken it around 10 years. “Both the acquisitions are working very well for us,” he added.
The participants said that each company has a different reason to enter into M&A transactions. For an apparel company, it is the brand value, while content is a major driver for media and entertainment firms.
“If you are a dedicated English content viewing consumer, then you will not see general Hindi content and the same is true with regional language content. Hence, when companies decide to acquire a company, they look at their requirements and accordingly [make that decision],” said Tarun Katial, chief executive at Reliance Broadcast Network Ltd.
An example of this is the Zee Group’s acquisition of Reliance Entertainment’s radio business, which was done so that Zee could enter the content segment, he explained.
Besides strategy, brands and technology, talent is another reason for acquisitions, said Ananya Tripathi, senior vice president of planning and strategy at fashion e-tailer Myntra.
“Companies like us struggle to get technical talent and that's where acqui-hiring becomes important,” she added. Earlier this year, Myntra acqui-hired logistics startup InLogg.
One prerequisite for most acquisitions is taking on board the founders and promoters, stated Mitesh Shah, head of finance at ticketing platform Bookmyshow. The firm earlier this year acquired Burrp and operates it as a separate entity to retain its identity. Burrp is still managed by its founders.
“We may integrate or cross-sell a few services but that will remain different and that's what keeps the value of the business intact,” said Shah.