Corporate Finance: Case study on Acquisitions - Ola, Oracle, Google and Microsoft, Flipkart, Inox, Byjus, Adani

This is the story of two entrepreneurs who set out to build a big business (after a drunken night at the Tavern pub), couldn’t, and so cashed out and moved on. It is the story of TFS’s oversized ambition, a black swan event, a government’s knee-jerk reaction, cash burn, over-reliance on venture capital funds and life in the times of Breaking News media coverage. 

 This is the story of how, in just two months, TFS went from a prospective good second bet in the taxi aggregator business in India, almost on the verge of raising $200 million, to a company that no venture capitalist would touch.

It all started when Ola Cabs (the company’s name is ANI Technologies Pvt. Ltd) turned up the heat—on 22 August 2014.

 Competition from Ola
 It was a business-as-usual move, a competitor trying to score a quick win, about getting the numbers up, sharply, just before stepping out to raise funds. And so, on a cool Bengaluru morning, Ola Cabs dropped Ola Mini cab rates by almost one-fourth, from Rs.13 to Rs.10 a km, making cabs cheaper than an auto rickshaw. The fare for an Ola sedan was slashed from Rs.16 to Rs.13 per km. And that was only for the consumer. For drivers, Ola started a weekly incentive scheme—a driver who did 30 or 40 trips a week could earn as much as Rs.8,000 as a bonus. In September, Ola changed the driver incentive scheme once again—to a daily one. A driver who did five trips a day would get a bonus of Rs.500, seven trips, Rs.800, 10 trips, Rs.1,200. Then came the Ola Wallet and a promise of 100% cashback, on the first recharge for every user, till October 2014. Ola’s rival, across town, TFS, was watching the firm’s every move closely. Ola’s logic was clear. The company had raised Rs.250 crore in a round of funding in July 2014 and was burning money to get more customers and drivers on its platform. In the process, it was losing as much as Rs.200 on every ride. “We thought it would not last, that it was just a spike,” says Raghu. “The daily driver incentives given by Ola had started affecting us because, at the end of the day, a driver has both devices and will choose whoever gives him more money. So we waited for September and October to see whether Ola would stop.” TFS was confident that Ola would.
 The company couldn’t have been more wrong. On 28 October, Ola raised $210 million (about Rs.1,281 crore) from SoftBank Internet and Media Inc. (SIMI) and its existing investors—Tiger Global, Matrix Partners India and Steadview Capital. “We never expected that someone would write a $210 million cheque for a cab aggregator company in India so soon,” says Raghu. “With that kind of money on the table, Ola would not stop. That’s when we thought we couldn’t just be on the sidelines and watch. That we would have to fight for our survival.” In the start-up world, whenever there is a large difference between two firms, raising capital becomes very difficult for the laggard. With $210 million at its disposal, Ola had serious potential to outrun TFS. So if TFS had to survive, it needed to grow. And then, because it had only so much cash in the bank ($8-10 million left, part of the $12 million TFS had raised in August 2014 from Accel US), it had to get into the market to raise another round, a big one.

Burning cash
 On 1 November, TFS decided to play the game. It came up with a simple strategy. Thanks to the higher per km rates, consumers weren’t using the service for short distance travel. So, at the consumer end, TFS dropped rates. To Rs.49 for the first 4km and then Rs.14 per km. But at the driver’s end, it needed to incentivize drivers to pick up rides. So it held on to the old rates for drivers (Rs.200 for the first 10km). So if a customer was paying Rs.49 for a 4km run, the driver would still receive Rs.200. To put it simply, TFS was losing Rs.150 per ride. But the strategy worked brilliantly. Almost immediately, there was a significant surge in the number of transactions. By the end of October, TFS was doing about 8,000 transactions per day without losing any money. By the second week of November, the number of transactions had jumped by almost three times. And so did the losses. On an average, TFS was losing Rs.36 lakh every day. In November, TFS burnt through $1.8 million (almost Rs.11 crore). If that wasn’t enough, the firm started expanding to other cities. It entered Hubli, Ahmedabad, Mysuru, Kolkata and Chandigarh. The way Raghu and Aprameya saw it, it was a do-or-die strategy. “You can be conservative,” says Aprameya, the co-founder of TFS, “but once you get aggressive, then you go for the kill. Maximum growth, maximum cities, all positive signs.”

Sometime in the third week of November, TFS started exploring the market to raise funds—around $200 million. Things looked good.  In early 2014, skeptics had questioned the size and scale of the Indian taxi aggregation business, but with SoftBank’s $210 million investment in Ola, almost overnight, the market was validated. Everyone agreed that it was a multi-billion-dollar opportunity. Private equity and hedge funds in the US and Hong Kong were excited. “We were bleeding,” says Raghu, “but we took a call to get aggressive. We saw a 4X jump and our investors were so happy. It was amazing. So many investors were interested in participating. And everybody was telling me, this is amazing Raghu, this is great. We can put in a large sum of money.” Over the next couple of weeks, talks between TFS and prospective investors progressed smoothly. The company saw interest from more than 20 investors in the US. Due diligence and number crunching had already been done. Only two steps remained; a partnership meeting with the firm, where the entrepreneur makes a presentation to the firm’s senior team, and the final nod for investment.

Usually, entrepreneurs like to do this face to face. With that in mind, on 6 December (a Saturday), at about 8.30pm, Raghu boarded an Etihad Airways flight from Bengaluru to San Francisco. Only when he landed in the US, on Sunday morning, and connected to the airport Wi-Fi, did he realize that while he was on the flight, an incident with dire implications for the taxi business had taken place in India. Late in the evening, at about 11pm on 6 December, news broke that a Uber cab driver, Shiv Kumar Yadav, had raped a 26-year-old woman passenger in Delhi.

Uber  - Bolt from the blue
 Once Raghu reached his hotel, he got on to a call with Aprameya and the senior management team from TFS to discuss the Uber incident. In Delhi, things looked grim. There was widespread anger and the air was rife with rumours that all taxi aggregator firms would be banned. Other states, too, such as Karnataka and Maharashtra, were considering a ban. The news of the ban was circulating on social media, but TFS hadn’t received any notice.

Back in San Francisco, Raghu started feeling the pressure. He had lined up almost 20 meetings with VCs and hedge funds the following day, Monday, 8 December. He didn’t want to go in unprepared. So he asked for a breakfast meeting with Arun Mathew of Accel US and Ashish Gupta of Helion Ventures. They met, first thing Monday morning. “And they were like, it has become a big thing,” said Raghu. “Everybody in the Bay Area is discussing this, and just this. That’s when Arun told me it was a really bad time for me to visit because most talks would be on the Uber incident.” Mathew was right. Raghu’s first partner meeting was at 8.30am, and this is how he remembers it going.

First question: What do you think about the Uber incident?

Second question: What will happen to Uber? “I was like, this is the heat of the moment...,” Raghu replied. “Over a period of time, things will settle down. I think, in some part, Uber will have to make some changes in its business model, and stuff like that. But it doesn’t mean things will get eliminated, it is an essential service.” The partners weren’t convinced.

Third question: Have taxi aggregators been banned? Fourth question: What does the law say? Fifth question: Why have you not taken permits? “I told them we had not received any notice,” says Raghu. “It is not a banned service, as long as the regulations governing aggregators are absent. It is a new model, and the government hasn’t thought about this.”

The partners didn’t share Raghu’s optimism. In their mind, regulation was top priority, and they needed more time to figure it out before committing to investing. Over the next five days, every meeting, 23 in all, Raghu had followed a similar script. Even as all this was happening, back in India, Aprameya was facing the music of a government that was desperate to be seen as doing something. In a knee-jerk reaction, it wanted to ban the service.

On Tuesday morning (9 December), Aprameya got a call from the Bengaluru police commissioner to come for a meeting at 11am. Most cab operators were there, except Uber. “They made me stand up and asked me, what is your model? Do you take responsibility?” says Aprameya. But, before he could answer, someone behind him quipped: “Sir, on their website, they are saying they don’t take any responsibility.” As Aprameya tells it, the commissioner was furious, and it felt like being back in school, being reprimanded by the teacher. The same day, news appeared that the home ministry had banned Uber and all other taxi aggregators in Delhi. But there was nothing in writing. “Till date, we have nothing in writing saying we are banning you,” says Aprameya.

But public sentiment was against the aggregators, and they couldn’t make a statement about not actually being banned. TFS was helpless. It wanted clarity, but couldn’t get any as there was no formal paperwork. “The media said the home ministry has banned the service but we were working with the transport ministry. They were saying an internal memo has been sent. So there was no clarity.” Back in San Francisco, Raghu decided to wait it out another week. And seek fresh meetings with VCs who had Indians in their management, with the idea that perhaps they would understand the regulatory flux in India better than the Americans, for whom absolute clarity on regulation was top priority.

But, even in those meetings, nothing changed. “It was sheer bad timing,” says Raghu. “I wasn’t frustrated because I could understand their concern. But there was disappointment.” Raghu could have stayed longer, but the holiday season was about to begin. On 21 December, he got back to Bengaluru. He had no money but assurances from a couple of investors, who were keen to sync back after 7 January, when they would be back from holidays. Back in India, things hadn’t changed much. There was no regulatory clarity in Delhi or Chandigarh, where there was supposedly a ban. “The funny thing is we didn’t stop operations anywhere,” says Raghu. “Because we didn’t have any notice. It was only in the news.” In the second week of January, things became difficult. The firm was losing money every day and it just couldn’t stop the incentives. The investors who had promised hope after 7 January got back and said they were unsure. And the existing investors were not in a position to bring in money. “It needed a big guy to come in and write that cheque. It was a lot of money,” says Raghu.

The inevitable sale
 On 10 January, two of Accel India’s partners, Anand Daniel and Prashanth Prakash, asked Raghu and Aprameya out for coffee; 30 minutes into the meeting, the Accel partners broached the subject of an interest from Ola Cabs. “So why don’t you guys consider this? It is something we can explore,” said Daniel. “In the meantime, if there is inbound interest from a large player (fund), that can also be considered.” It wasn’t an easy discussion to be had. Raghu says that his first reaction was ‘no’. “We said that as founders, we wouldn’t want to sell to competition,” he says.

 On their part, Daniel and Prakash argued that on the face of it, Accel was interested in talking with Ola but that it was not their decision to make. “They have approached us and we think it is our responsibility to come and tell you guys. So you guys decide,” said Daniel. The meeting lasted about two hours, after which both Raghu and Aprameya went back to office. Once inside the boardroom, they frantically started putting together the names of the investors that they could reach out to at short notice. They were going to ask for some money to “weather the storm to survive”, says Raghu. They cut down on the amount of $200 million. On a piece of paper, Raghu put down 14 names. And over the next few days, he began calling each one of them. It was a futile effort. TFS had very little money left, and absolutely no time. The company had less than $2 million in the bank, which would have lasted only till mid-February. “We ourselves were not convinced (that we would survive),” says Raghu. “I called all the 14 people, and we even convinced two to participate; but it was too little, too late. We could have survived only for two-three months with that kind of money.” After a while, pragmatism won. The firm couldn’t afford a scenario where there would be no money to pay the salaries of the 1,800 employees. Or worse, pay operators. Between 15 and 20 January, the promoters realized selling out to competition was probably their best option. “That’s when we reached out to our investors to reach out to Uber and also began talks with Ola,” says Raghu. Even as all this was happening, on the morning of 28 January, The Times of India ran a story, citing people it didn’t name, that Ola Cabs would acquire TaxiForSure. For $200-250 million. The story said it is a “sealed deal and could be announced in the next few weeks”. Raghu claims the deal was far from being sealed as TFS had just begun talks. And not just to Ola but also Uber. For the outside world, it didn’t matter. At TFS’s office, all hell broke loose. “You know, 28 January was so miserable,” says Raghu. “I walk into office and see and pages opened on some of the employees’ monitors. It is an open office, and you feel so bad. And you can’t walk up and say anything. And people are also not going to come up and ask.” Over the next few days, the cross talk among employees increased, so did the speculation. “For a few days after that, people would just leave at 6pm. We’ve never seen our office empty at 6,” he adds. Previously, on 20 January, the firm had “capped marketing expenses and put a freeze on hiring. So now, people started co-relating and jumping to conclusions”. It wasn’t long before the taxi operators started dropping by. Curious to know what’s happening because their livelihood depended on TFS’s existence. Aprameya and Raghu were helpless and frustrated. “We believed we are open and transparent,” says Raghu. “So now what? How do you hold that belief? Some people felt they are getting cheated because they are getting to know things from the newspapers. That phase was really bad—where we had no answers.” It is another matter altogether that concern over the future of the employees was playing on top of their minds in seeing the deal through. And to solve that piece of the puzzle, Raghu turned to Phanindra Sama, the founder of Redbus, for advice. Sama had made a successful exit in 2012, when he sold Redbus to Ibibo, but the exit hadn’t gone as well as Sama would have liked it to. In the first week of February, Raghu and Sama met at a Café Coffee Day outlet in Indiranagar, at 5pm. Raghu had a simple question for him: what are the mistakes he could avoid? Or what is it that Sama would do differently, if given a chance? It was then that Sama shared an interesting anecdote with him. Something that took place after Redbus was acquired by Ibibo. When an employee walked up to him and said: “Phani, just like you, we also gave our blood, sweat and tears for the firm. So why is it that you are the only one making money?” So Sama asked him, “What is it that you want?” And he said: “One month’s salary as bonus will do.” “That’s what Phani told me,” says Raghu. “That if at all, you should give one month’s bonus to all the employees. And I was like, okay, if that’s the case then why one month, we will give two months’ bonus.” That’s how equity stock option (ESOP) acceleration (for TFS stockholders) and two months’ bonus for about 1,800 people became the centre of the conversation and negotiation with Uber and Ola.

 With Uber, the discussions went far, before a scary reality emerged. The company globally has 848 people on its rolls. TFS had 1,800 people in India. If the deal was to go through, it would lead to a massive bloodbath. “That’s where we closed it,” says Raghu. “So product, engineering, marketing, analytics, and tech, Uber has its own thing. And also Uber believed only in a driver-led model, so our operators (people who own and run a fleet of cabs) would also go. So it would have been a bloodbath and 90% of our people would have had to go. That’s why we said no.”

After that, it was just Ola. And Bhavish Aggarwal, the founder of Ola, agreed the company would continue to work with operators, and also ensure that none of the people in the team would lose their jobs.
 “We raised $26 million and sold for $200 million... That’s 1/9th of what Ola has raised. And Uber has already pumped in a lot of money—at least five times more than that. We were doing 40,000 transactions a day with that money. You know it would have required one more guy in the world to say, ‘Yes, we will fight SoftBank’. It never happened, but that’s okay.” It is evident that luck and timing haven’t exactly gone TFS’s way. Raghu says it is about circumstances. “We were lucky to have lived this journey and made a respectable exit. From a personal ambition, vision and goal, yes we were unlucky. But it could have been worse. Much, much more worse.”

Is Acquisition Of 'TaxiForSure' Good For 'Ola'

 A columnist of Your Story quoted, “complete lack of hoopla around the acquisition…   may seem intriguing.” Pointing at Ola Cabs’ acquisition of TaxiForSure is not very stable on its part and seems fragile. There are some companies in Indian history that are valued too much although it didn’t gross any profit.

 What Next for TFS Promoters

One would think selling the company you co-founded for a neat $200 million (Rs 1,200 crore) would entitle you to a life of leisure. Not if you are Raghunandan G, who seems to be raring to get the adrenaline rush back by launching a start-up in the business-to-consumer (B2C) segment. This is less than a fortnight after his last day at TaxiForSure, the cab aggregator he and Aprameya Radhakrishna sold to bigger rival Ola.

The easier role of a mentor is not for him. Though he has made a few angel investments, the 33-year-old believes "getting your hands dirty is more fun than sitting and giving advice".

In a coffee shop in Koramangala, a favourite Bengaluru neighbourhood for start-ups, a relaxed Raghunandan, former chief executive of TaxiForSure, reveals he is considering several options, though yet to zero in on that one billion-dollar idea. "I can probably build and scale a business in the B2C segment, and I will probably restrict myself to something that I understand," he says. What he is sure of is that it should be bigger than TaxiForSure.

The idea, he says, could be around products or services and, ideally, should solve a problem many people face. Funding, he says, would not be a problem.

"We have access to capital, and all who had invested in us, as well as those we had spoken to but who could not be part of TaxiForSure, are willing to invest." He is also unfazed by the increasing competition in the consumer-facing space. "There are too many people, but who is executing it right," he asks. The conviction comes from experience - when TaxiForSure was launched in 2011, it was not the first or second taxi aggregator app. It was the eighth. Ola, incidentally, was the 10th.

Even as he considers various ideas, Raghunandan has a busy schedule: Meeting entrepreneurs and investors at coffee shops in different parts of the city, mentoring start-up teams, and advising Chinese, Japanese and American venture capital funds looking to enter India and eager to hear his views. He has invested in a few start-ups, too, but he declines to reveal the details. That should be the companies' prerogative, he says. And, he is spending more time with his wife and son, "who is finally realising he has a father (laughs)".

Radhakrishna, his friend of 15 years and co-founder, is on a world tour with his wife, in lieu of the honeymoon that he was not able to take when he got married a year ago.

Ola's acquisition of TaxiForSure in March was the first sign of consolidation in India's growing taxi aggregation business, part of the Rs 11,000-crore taxi market. Originally, Raghunandan and Radhakrishnan were to stay with TaxiForSure for three months after the acquisition in early March and "contribute in advisory roles". However, the transition was wrapped up in half the time, making April 16, 2015, their last day at the company. The two co-founders now own 0.8 per cent in Ola, worth over $19 million (around Rs 120 crore), according to a VCCircle report.

Are there mistakes he will not repeat with his next venture? "Oh, a whole lot," he says immediately. Top of the list is avoiding an excessive inward focus. "TaxiForSure started growing so fast… we did not look at anything outside," he recalls. "When you are driving a car, you need to also look at signals, not just the road." Linked to this is the founders' ability to assess the market accurately. While investors help, they end up saying several things, and it is difficult to always "pick up the signals from the noise", he adds.

He would also be much more careful about the terms of the agreements signed with investors while raising funds. When they set out to raise Rs 50 lakh for TaxiForSure, they wound up with funding of Rs 5 crore - no doubt a heady feeling. "But we got so carried away with the valuation and the money we raised that we did not look much at the term sheet," he recalls. What they did not realise was "the valuation keeps changing every quarter but the terms get carried forward". And with a new investor, they would be offered the same terms.

What Raghunandan will take with him to his next venture, whenever it is launched, is his core team, given his relationship with them and the trust they share. "When we were announcing the Ola deal to our (1850) employees, we had prepared a list of questions we expected they would ask, such as the future of their jobs. Instead, all they wanted to know was what his and Radhakrishna's next venture would be. "We had a brilliant team," Rahgunandan says, with a smile.


How Ola Started

From Ludhiana to UK via Australia: How Bhavish Aggarwal drove to success  AUG 15, 2018
How would you react when the rogue driver of a cab you hired dumps you midway? A young IIT grad used that experience to launch one of the world's biggest ride-hailing companies. Ola founder and CEO Bhavish Aggarwal once rented a car for a weekend trip with friends to Bandipur from Bengaluru. The driver stopped the car in Mysore and wanted to be paid more. Aggarwal and his friends had to cover the rest of the distance by bus.
Founded in 2011 by Bhavish Aggarwal and Ankit Bhati, Ola is now headed to the UK after expanding to Australia a few months ago. According to market intelligence firm KalaGato, Ola increased its market share in India from 53% in July 2017 to 56.2% in December while its rival Uber’s share slipped from 42% to 39.6%. Ola saw its losses widening to Rs 4,897.8 crore during 2016-17 but its total income grew 70 per cent. In July this year, Ola crossed a major milestone by starting to make money on each cab ride. That's a significant achievement because at the peak of the ride-hailing battle in 2015 and 2016, the companies were losing Rs 100-200 per ride.
Aggarwal, just 32 years old, was born in Ludhiana to doctor parents; grew up in Afghanistan and the UK; and reached IIT-Bombay to study computer science via Kota, India's coaching hub for admission to top tech courses. After a stint at Microsoft, Aggarwal and Ankit Bhati — his IITian friend from Jodhpur — started a tech platform to book cabs for outstation trips. When Aggarwal explained his business model to his family, they asked if he was going to open a travel agency. They didn't understand why Aggarwal would leave his cushy job at Microsoft to become a travel agent. But they let him experiment.
 Aggarwal and Bhati started out in 2011 from a 1 BHK office in Powai, Mumbai. The office functioned as the work space for their drivers during the day and for them at night. Not many were buying their holiday trips. They were trying to do for cabs what Makemytrip was doing for air travel and Redbus for buses. But they had to shut that in four months. We realized the real pain point was city travel. The realisation deepened with Aggarwal's experience with the rogue taxi driver in Bengaluru. They shifted to car rentals and started operating from a 100-square-foot office in the basement of a half-empty shopping center called Dreamz Mall. "When asked where our office was, we’d say ‘Dreamz Mall’. People invariably asked, ‘Dream Small?”’ Bhati, now chief technology officer of Ola, had told Bloomberg. Indeed, it was a small dream that the duo turned into a mega reality.
 In 2012, Aggarwal and Bhati began offering rides on demand to customers who called them on phone. There were times when Aggarwal had to pitch in for drivers. he would borrow the car from his girlfriend, who is now his wife, to pick up a client. Soon they launched their smartphone app. When they received a $5 million investment from Tiger Global Management in the same year, they knew they had got it cracked. When Aggarwal started meeting investors, he was a total greenhorn in the world of business. Ola's first round of funding was an angel round and it was by far the toughest funding round they did. Rehan Yar Khar, Anupam Mittal, Snapdeal's Kunal Bahl, among others, were Ola's initial investors. "Back then taxis were not glamorous. We were doing just a few rides a day.I remember an angel investor asked me to send across our “org structure“ and I had no clue. I went back and Googled it; that's how naive I was. I had no clue what topline and bottomline were in the context of business. I was a techie and was into coding and the business side was completely alien to me," Aggarwal told TOI.

But it wasn't easy for them to scale up Ola operations. Aggarwal has said it took him three years to convince even his wife to use Ola. She would tell him "nahi mein kaali peeli use karloongi,” referring to the typical black-and-yellow Mumbai taxis. When two years, Ola got funding from Silicon Valley’s Sequoia Capital and Japan’s SoftBank Group Corp., Ola had really arrived. Today, Ola has more than 6,000 employees and operates in 110 cities with a million drivers.
When Ola reached Aggarwal's hometown Ludhiana, his parents got to know in quite a dramatic fashion. Their driver quit, bought his own car and registered with Ola. Aggarwal told Bloomberg that his mother was upset first. Then she downloaded her son’s app and learned to summon a car whenever she wanted one. “She feels liberated,” Aggarwal said.

 Sachin Bansal, the founder of Flipkart, who had a similar run to amazing success once wrote this on Aggarwal in Time magazine: “For those who meet Bhavish Aggarwal for the first time, his polite, soft-spoken demeanor is impossible to forget. Get to know him a little more and you will soon notice his vision, passion and determination to stand against all odds. After all, he co-founded Ola, one of the world’s largest ride-sharing companies, scaled it to more than 100 Indian cities, empowered millions of driver-partners and commuters, and is a flag bearer for India’s consumer-tech ecosystem all by the age of 32.”

Story of another startup : Housing.Com Co-founder sends his resignation to Private Equity Investors owner Rahul Yadav has now resigned as the CEO and chairman of the house hunting start-up after several weeks of controversy and drama.
Yadav has written a scathing resignation letter to the board members and investors accusing them of lacking of any "intellectual capability", The Economic Times reported today. Yadav has given the company just seven days to work through the transition, with no other explanation for the short notice period.
“I'm available for the next seven days to help in the transition. Won't give more time after that. So please be efficient in this duration,” Yadav wrote in the letter.
The company’s board, which is scheduled to meet today, has reportedly acknowledged Yadav’s resignation.
Yadav's letter seems to have created a buzz on Twitter too with several people lauding him for his 'blunt' resignation.

Rahul Yadav Vs SoftBank
A source close to the development said that's biggest investor Softbank, which had pumped in Rs 550 crore into the company in December 2014, and Yadav have been at war for a while now. In April, SoftBank Corp. vice-chairman Nikesh Arora had quit the board of the company too. Moreover, the Mint report said that investors are unhappy about the company’s high cash burn and the controversies it has become embroiled in.
Rahul Yadav.
Rahul Yadav Vs Times Group
Earlier this year, in March the Times Group served a defamation notice to Yadav and the company’s board after he accused the Times Group of spreading rumours that the Board was looking to replace him as CEO, and suggested that it was doing so because of business rivalry (Times Internet Ltd owns, which is a direct competitor to The Times Group notice to Yadav had then asked him and the company's directors to issue an unconditional apology, along with Rs 100 crore.

Rahul Yadav Vs Sequoia Capital

Investors had earlier also raised their concerns with Yadav's strategy which led to a public spat between him and managing director of Sequoia Capital Shailendra Singh. In a March email, Yadav accused Sequoia of doing “inhuman and unethical things” at
The mail allegedly written by Yadav to Singh on 6 March found its way on to a Quora thread, only to be taken off later, in which the executive threatened to 'vacate the best' in Sequoia.
Reportedly addressing Singh as 'Dude', Yadav said that he had been humble to 'you guys' even after the 'inhuman and unethical things' they had done in the past and said that the venture capital firm had indulged in similar actions with firms like Ola Cabs, Flipkart and others.
Yadav reportedly wrote that he had discovered that Singh was after Housing's employees and was brainwashing them 'to open some stupid incubation'. The chief said that if Singh didn't stop 'messing around' with him, he would vacate the best in the venture capital firm.

8/30/2015 : Unicorn Startups
The term Unicorn refers to start-ups that are valued, on paper, at $1 billion or more by investors. The list of future unicorns, published by The New York Times based on data compiled by research firm CB Insights, has been put together taking into account multiple factors such as the capital raised, employee turnover and social media mentions.
OYO Rooms and Grofers, two relatively young Indian start-ups backed by a truckload of venture capital, have recently made it to a list of 50 start-ups globally that are tipped to be the next unicorns.
Delhi-based budget stay aggregator Oravel Stays Pvt. Ltd, which owns OYO Rooms, has just raised $100 million in a fresh funding round led by Japanese technology conglomerate SoftBank Corp. The latest funding round values the three-year-old company at a reported $400 million. Earlier investors in the company include Lightspeed Venture Partners, Sequoia Capital and Greenoaks Capital. Including the latest round, OYO Rooms has raised more than $124 million so far.
Grofers, owned by Gurgaon-based Locodel Solutions Pvt. Ltd, is a hyperlocal delivery start-up that enables users to order groceries and other essentials through its mobile app. It is backed by New York hedge fund Tiger Global and Sequoia Capital and raised $35 million in a new round of funding in April from the two investors. The round valued the barely two-year-old start-up at a reported $115 million.
Unlike their predecessors in the so-called unicorn club, the path to those billion dollar valuations will be slower. AsMint reported this week, the funding frenzy that has been underway here over the past 12-18 months is at an ebb. Investors, notably venture capital firms, hedge funds and strategic investors such as SoftBank, are taking more time to close new funding rounds.
This is particularly true of the e-commerce sector, which remains investors’ favourite hunting ground for future unicorns. Mumbai furniture e-tailer Pepperfry took about eight months to close a $100 million round led by Goldman Sachs. Delhi-based e-commerce marketplace Snapdeal, another Indian unicorn, took six months and some hard bargaining to raise $500 million from China’s Alibaba Group and Taiwan’s Foxconn Technology at a lower than desired valuation. Even e-commerce bellwether Flipkart, among the earliest Indian start-ups in the unicorn club, finds itself negotiating harder to raise a $600-800 million fresh round from new investors. Talks have been on since March.
It isn’t that capital isn’t available. Venture capital investors have raised nearly $4 billion in the last 12-18 months for investments in Indian start-ups. Add to that the potential capital that is available from strategic quarters such as SoftBank, Alibaba and Foxconn, which are far from done investing in India’s start-up economy. Then there are the private equity funds, late-stage investors that have so far stayed on the sidelines but are gradually getting interested in mature start-ups.
Still, the next few months will see investors, particularly venture capitalists, err on the side of caution. Almost every venture capitalist I’ve spoken to over the past week will pursue a two-fold game plan over the next few quarters.
One, investors have started rightsizing existing portfolios. This will see them separating the laggards from the winners. Expect some write-offs and sell-offs to be announced over the coming months.
We’ve already had one big sell-off this week. Mumbai-based ad network Komli Media’s India business has been acquired by Delhi-based SVG Media for an undisclosed amount in an all-cash deal. The company’s investors—Norwest Venture Partners, Nexus Venture Partners, Helion Venture Partners, Draper Fisher Jurvetson and Peepul Capital—are exiting with the deal. The four investors had pumped nearly $100 million into the company over multiple rounds. A couple of deals in the fashion e-commerce sector are on the verge of being written off. Even the emerging hyperlocal services category—food and grocery delivery, home services, property search—is beginning to see a correction.
Two, while they go slow on committing fresh capital to mature start-ups, investors will move more aggressively into seed deals when it comes to making new investments. Such companies don’t need a lot of money on the table. By making small bets, early enough, investors can enter new companies at lower valuations. That way, if the business doesn’t look viable enough for further investment, the losses on write-off will be relatively less painful.
This is not to say that venture capitalists aren’t chasing unicorns any more. That’s still on the table. But new contenders to the unicorn club will have to work harder than their predecessors to get in their next rounds. Investors will also be working hard to ensure their investees are chasing real business metrics rather than paper valuations.
That’s a good thing for the start-up economy. Remember that the last time a unicorn club contender raised a $100 million round too quickly from a large strategic investor, things went downhill very quickly.

 Contrarian View on E-commerce prospects in India

The reality of Indian e-commerce that Jack Ma should know
Despite comparisions between India and China, the way internet is accessed tells a tale of two very different countries
Rahul Jacob  |  New Delhi  April 9, 2015

Jack Ma blew through Delhi recently and is already planning a return visit later this month. The Chinese billionaire and founder of Alibaba is said to be planning a significant investment in business to business e-tailing as well as payment services and logistics companies. 

India certainly has plenty of promise. Sales growth in e-commerce was up 27 per cent to almost $4bn. Like China, it has a 1 billion-plus population. Everywhere you look, from furniture sites to taxi apps, from online grocery stores to fashion e-tailers, there are articulate entrepreneurs spinning exponential growth stories. Companies like Flipkart are being billed the next Alibaba. The valuation of Flipkart reflects that venture capitalists are projecting China’s growth patterns in evaluating India’s. Flipkart is already valued at $11 bn.
Ma should look before he leaps. On Thursday, the global consultancy A.T. Kearney released a new global ranking (Read here) of countries with e-commerce potential. India is not even ranked. India’s $3.8 bn in e-commerce sales  last year was just a fraction of the US's at $238 bn and less than a third of Brazil’s at $13 bn, according to the study. These paltry sales figures are just the tip of India’s e-commerce mirage.

The country’s internet backbone, which sometimes seems a transplant from the era of IBM mainframes, is part of the problem. On the day Ma visited Prime Minister Narendra Modi in New Delhi, the United Nations released a survey underlining these anomalies: it said India was one of the least e-commerce friendly places on the planet. The country ranked 83rd out of 130 countries in the ranking that measured internet users in the country, the availability of secure servers and credit card penetration. 

Only 20 mn Indians have third generation mobile services, which is essential for multimedia content. The average broadband speed is 2Mbps, putting India 115th globally, which is the lowest in Asia, according to IndiaSpend, citing the US technology company Akamai. 

With their eye on listing on Nasdaq just as Alibaba famously did last year, receiving a valuation of $170bn, Indian entrepreneurs often argue that India is the next China. It’s a seductive narrative and seasoned investors from Tiger Global (a big investors in Flipkart) to Japan’s Softbank (which invested $800m in Indian e-commerce in 2014) are placing bets that it might even be true. 

The way the internet is accessed tells a tale of two very different countries, however. In China, about a third of those who go online are “continuously connected” and about 60 per cent check the internet two to four times a day. The AT Kearney study characterizes its online buyers as “sophisticated, with well-developed brand aware for and trust in the big names. “ By contrast, Osama Manzar, director of the Digital Empowerment Foundation, told IndiaSpend, that more than 80 per cent of India’s net users are “static users,” which is to say only intermittently connected. Only 2 to 5 per cent of those on the internet In India are regular users, in the sense of using it to conduct their daily lives. About half of India’s universe of 15 million wired broadband users in India are corporate users. 

India’s primitive financial and physical infrastructure poses daunting challenges for all businesses, but especially e-commerce. Because credit cards are used by only 1.8 per cent of the population, anything from 50 to 80 percent of purchases are paid via cash on delivery. Warehouse space in our densely packed cities is next to impossible to obtain, not least because real estate often costs what it does in the developed world. 

If the returns on investment seem daunting, India’s competitive environment is also much more demanding than China’s was. For starters, Alibaba, Baidu and the Chinese Twitter, Weibo, initially had little or no domestic competition and certainly none from multinationals. In India, by contrast, Amazon and Google are already well entrenched. Flipkart is certainly bigger than Amazon but the stiff competition is making the company bleed. To be fair, Amazon itself has had a very hit and miss relationship with profitability. Taking that as its cue, Indian e commerce entrepreneurs dismiss questions about profits as a sign of the lack of maturity in India.

In the glass-always-brimming world of Indian e-commerce entrepreneurs, the wide use of phones to access the internet rather than computers is called leap-frogging; seven out of eight Indian users access the net on mobile phones because less than 5 per cent of Indians have access to computers.  What this points to is likely lower spending by consumers.  Which is what you would expect from an economy with per capita incomes of $1500 versus more than $6000 for China and more than $50,000 in the US. Perhaps Indians can surmount the slow speeds on their smartphones to transact on the internet if they have enough patience. But, how will vast sections of the population shop online without the money to pay for the goods on their screens?

And, if anecdotal evidence were needed that this is a bubble, India’s government provided it recently when it suggested to the CEO of the ICRTC website of the Indian Railways that he should think like an internet entrepreneur. The government told him the railways website should be “India’s next Flipkart.” Then again, with Flipkart being projected as India’s Alibaba, no claims in India’s parallel internet universe can be termed too outlandish.

Defences against Acquisition

First Oracle faced  the challenge of antitrust trials.After the court cleared antitrust case, the hurdles that still remained for Oracle were PeopleSoft’s poison pill and the company’s Customer Assurance Plan. PeopleSoft had instituted its poison pill defense in 1995.

Poison Pill

The defense allowed the company’s existing shareholders to purchase the company’s stock at half price in an event of a hostile takeover bid in which the acquirer had acquired 20 percent of the company’s stock.

CAP was adopted in June 2003 after Oracle had made its first takeover bid. The provisions under CAP guaranteed pay back to PeopleSoft’s customers between two and five times the software licensing fees if the company was taken over within two years or if the product support declined within four years. Since the CAP was announced, the potential liability under the scheme for Oracle was estimated to have reached $1.5-2 billion.

Integration Issues

Customer Perception Issues

All through the battle to acquire PeopleSoft, customers were concerned that they would have to move to a pure Oracle platform. This view was reflected in a survey of 150 PeopleSoft’s customers by Boston-based AMR Research conducted during the 18-month period. Of those surveyed, 15% commented that they would discontinue their vendor maintenance contract immediately if the merger went through. Another 47% said they would cancel their contract if the vendor stopped updating the products. Fears were also expressed that the maintenance pricing would move up over time, after the merger.

However, some analysts felt that the acquisition would benefit customers. The continuing aggregation of varied software products could solve the major problem of product integration. Organizations had to frequently spend more on getting different brands of enterprise software to exchange data smoothly. These applications could become easier to install and use if they belonged to one software company.

In light of the significant confusion over the Oracle-PeopleSoft merger, analysts felt that competitors such as SAP would stand to benefit. Due to the prolonged uncertainties because of the takeover tussle, SAP found it easy to acquire new customers. After the merger, it could acquire customers who did not want to migrate to the merged entity’s products. Analysts feared that customers would stop buying PeopleSoft’s products as they had stopped buying JD Edwards’ after its merger. Pointing out to the tough task ahead for Oracle, David Dobrin of B2B Analysts in Cambridge, said: “Oracle now takes on the job of managing four different product lines in an area that it has never shown much aptitude for. Oracle will be doing that while battling a strong competitor like SAP

Operational Issues

Analysts pointed to several integration challenges for Oracle’s management, given the scale of the merger. The fact that PeopleSoft was not able to successfully integrate JD Edwards added to the complexity of this acquisition. Analysts said that as far as the integration issues were concerned, Oracle had to deal with both PeopleSoft and JD Edwards. Moreover, Oracle and PeopleSoft had fundamentally different approaches to systems design. While Oracle built applications very close to its core database technology with stored procedures and triggers, PeopleSoft enabled its applications to run on multiple platforms. Industry experts felt that reconciling this difference would be a tough task.

Cultural Integration Issues

The new entity would have a 50,000-strong workforce to manage. Issues relating to cultural integration had to be sorted out too since both companies had different cultures. Moreover, it was expected that in light of the hostility involved in the takeover, PeopleSoft employees could take some time to adjust to Oracle’s culture. Commenting on this, Leo Apotheker, SAP’s board member, said, “Software companies do not make hostile bids. Execution is very difficult.” Above all, Oracle did not have much experience in managing acquisitions. It had never pursued acquisitions as a major strategy in its business model.

Post Merger Integration

Oracle announced that in its efforts to successfully integrate PeopleSoft, it would pursue a few initiatives on the workforce, customer support, and product integration fronts. The company announced that it would reduce its combined workforce by 10-12 percent, and this would be executed for both PeopleSoft and Oracle employees.

Oracle promised that it would provide customer support for both the PeopleSoft and JD Edwards’s product lines till 2013. The company had retained 90 percent of PeopleSoft's development and round-the-clock support for PeopleSoft Enterprise, JD Edwards EnterpriseOne, and JD Edwards World products. Oracle also promised to support its rival database technologies, including IBM’s DB2, Microsoft’s SQL Server as well as the middleware from IBM and BEA. The company issued an estimated timeline for future versions of PeopleSoft and JD Edwards products and also announced its plans to provide customer support for these products.

In its efforts to integrate the products successfully, Oracle launched “Project Fusion.” The project aimed at supporting acquired technology from PeopleSoft and JD Edwards, and developing the next generation merged product. It would be based on an architecture that would be modularized for flexible deployment, better performance, and easy maintenance. In the long term, Oracle planned to transfer various functions to its own E-Business Suite 11i, making it a more advanced set of applications.

Inorganic growth strategy

Lupin buys out US generics firm Gavis in $880-mn transaction

Pharma major Lupin Limited has entered into a definitive agreement to acquire privately held New Jersey- based Pharmaceuticals LLC and Novel Laboratories Inc (GAVIS) in a transaction valued at $ 880 million, biggest ever acquisition in the US by an Indian company. The acquisition is cash free and debt free, according to Lupin.
Gavis brings to Lupin a highly skilled US based R&D organisation, which would complement Lupin's Coral Springs, Florida, inhalation R&D center and a New Jersey-based manufacturing facility, which will become Lupin's first manufacturing site in the US, the company said.
The acquisition enhances Lupin's scale in the US generic market and also broadens its pipeline in dermatology, controlled substance products and other high-value and niche generics, it stated.
This is a pivotal acquisition for Lupin as it aligns with our goal to expand and deepen our US presence. GAVIS has a strong track record of delivering highly differentiated products in a short time and is poised for continued strong growth as it delivers on its existing pipeline..,' Vinita Gupta, chief executive officer of Lupin said.
The deal comes at a time Lupin's US sales took a hit owing to fewer launches. The company reported a 16.7 per cent decline in net profit at Rs 524.7 crore for the quarter ended June 30, 2015 as compared with Rs 629.6 crore in the year ago period. The company's US sales fell 26 per cent to Rs 1,190.6 crore during the quarter as compared with Rs 1,603.8 crore in the corresponding quarter last year.

  Google buys and sells off Motorola , Microsoft  buys and  later writes off  Nokia- Case study on acquisition and disposal of Mobile Phone business by two IT gaints

An expert opinion when Acquisition was announced in Sep 2013. Later in 2015 it was sold off

Nokia Can't Save Microsoft — Only its Geniuses Can!

Vivek WadhwaFellow, Arthur & Toni Rembe Rock Center for Corporate Governance at Stanford University

Microsoft's announcement that it is buying Nokia's Devices and Services unit shows it thinks that by acquiring the right technology, it can regain its lost momentum. Sadly, the company is mistaken. Microsoft's problem isn't that it has too little technology; it has too much. And it has too many smart people whose talent is being wasted.

Instead of expanding, it needs to be disbanding its divisions and dismantling its bureaucracy. This will give its innovators the freedom to take risks and do what they do best.

When IBM was struggling for survival in the early 90s, Bill Gates advised its new CEO, Louis Gerstner Jr., to dismantle the IBM empire and create a smaller and more aggressive company. He wanted him to “strip away its unprofitable assets and concentrate on a narrow set of businesses”. Fortunately, Gerstner didn’t listen to Gates. IBM was focused on a single market: the enterprise. It was able to sell hardware, software, and services to a customer base it knew; breaking up the company would have led to disaster.

The medicine that Gates prescribed to IBM is what Microsoft needs today. It is focused on too many conflicting markets—enterprise, personal computing, mobile, and entertainment—and doesn’t understand all of them. Each requires its own marketing strategy, pricing structure, and array of products—which often conflict with each other.
As Microsoft’s failures have shown, it is fighting a losing battle. It has lost ground in practically every emerging field, including mobile computing, music players, smartphones, search, and social networking. Yes, it has had an odd success or two, such as the Xbox, but these are just flukes.
To put it simply, Microsoft has become a grumpy old giant, obsessed with defending its ageing products.Buying more products won't help it--it will just create indigestion.

I believe that the best path forward for Microsoft is to break itself up into a number of stripped-down and aggressive companies. These need to be free to compete with upstarts in Silicon Valley and with each other. These micro-Microsofts need to have the freedom to take risks and cannibalize the company’s core products.

Microsoft certainly has the talent to do this. But, sadly, it is being wasted.
For two decades, Microsoft was the tech industry’s strongest talent magnet. It hired the best of the best. Most of these geniuses haven’t left—yet. My former students and friends who work at Microsoft tell me that they are stifled by its bureaucracy, turf wars, and central planning. Big ideas get quashed because they don’t fit into the corporate vision; products with great potential are killed because they could threaten the company’s core products.

Microsoft also has serious problems with its culture, as Kurt Eichenwald explained in Vanity Fair. Its employee-ranking system, called “stack ranking”, brings out the worse in its employees by causing them to constantly battle each other for promotions, bonuses, and survival. Employees are rated on a bell curve in each department, so if they happen to work with superstars, they get graded poorly. Instead of working together and helping one other, they work hard to make sure that their colleagues do not work hard. And, with reviews being every six months, the focus is always on the short term.

This is the opposite of the culture you find in Silicon Valley startups—where employees work day and night to battle a common enemy. They are motivated by the stock that the company gives them—so everyone wins if the company does well. Microsoft no longer has such a currency—its stock has remained flat for longer than a decade.

As I explained in my Washington Post column, the Windows 8 fiasco illustrates this reality and the problems that Microsoft faces.

Windows RT, which is the version of Windows 8 that was designed for tablet computers, has a beautiful user interface and functionality. It could have given both Apple’s iOS and Google’s Android a run for their money. But Microsoft wanted to protect its desktop operating system and Office tools from oblivion as tablets overtake both laptops and desktops in sales, so it bundled a version of Microsoft Office into RT and charged resellers a price rumored to be about $85 per device (the OEM price is a well-guarded secret). This is more than what lower-end tablets will soon cost, and it competes directly with Android — which Google gives away. To maintain consistency with the desktop version of Windows 8, Microsoft added to it the same tiled user interface that was designed for tablets with touch screens. But most desktop computers and laptops don’t have touch screens. Microsoft also removed the “start” button that people are used to. So, both products failed to gain widespread market acceptance.

If Microsoft had allowed its tablet operating system group to act independently, they would probably have taken Google head-on by giving RT away. They could have made money by charging for special features and apps such as Office. They might also have committed heresy by selling Google’s Office apps and other competitive products. RT could have snatched Android’s market share and become the leading mobile platform.
Will Microsoft figure all this out? I am not hopeful. It is presently looking for a replacement for Steve Ballmer and it announced the Nokia acquisition. Any new executive coming in will try to fortify his empire, not disband it. Meanwhile, the PC market—which Microsoft is vigorously defending—will continue to lose market share to tablets, which are becoming cheaper and cheaper and adding cell phone functionality. Windows RT and Surface tablets will slip into oblivion. The prices of smart phones will also drop. And Microsoft will continue to miss out on new market opportunities, because it needs to protect existing markets.

Sadly, it is more likely than not that Microsoft will go the way of Kodak, RIM, and Nokia—all of which tanked because they were busy protecting old turf.

Write off News started coming as early as April 2015

Microsoft could take a massive write-off to the tune of $5.46 billion on its acquisition of Nokia assets as soon as July of this year, according to some industry watchers.
The speculation starts with some language from Microsoft's quarterly earnings statement from last week, as Computerworld reports.
Basically, Microsoft's Phone Hardware division - which mostly consists of the assets it bought from Nokia in 2013 for about $7.9 billion - was spending so much money on sales of Windows Phone hardware that it actually lost around twelve cents per device sold.
That's before you even factor in all the other costs of doing business, like marketing. In other words, it spent $1.8 billion to sell $1.4 billion of phones.
Even with the overall number of phones sold going up, it's not a great way to run a business, and Microsoft is warning investors that change is coming.
"Declines in expected future cash flows, reduction in future unit volume growth rates, or an increase in the risk-adjusted discount rate used to estimate the fair value of the Phone Hardware reporting unit may result in a determination that an impairment adjustment is required, resulting in apotentially material charge to earnings," Microsoft said in its report. 
This is a fancy way of saying that Microsoft seems to think that the Nokia acquisition isn't worth the $5.46 billion value it's been reporting to shareholders.
It's possible that Microsoft will only write off part of that $5.46 billion. But the last time Microsoft used language like this in an earnings report was back in 2012, three months before it took a $6.2 billion charge to its bottom line for its aQuantive acquisition. That was basically the entire value of aQuantive, which it bought in 2007.
"A very, very big write-off -- and associated quarterly loss -- is coming soon. What a disaster," wrote industry analyst Ben Thompson on his blog.(Subscription required.)
Computerworld reports that the company usually does these calculations around May - toward the end of its fiscal year, which is June 30 - so this write-off could happen as early as July of this year.
Microsoft's Phone Hardware division can't seem to catch a break.
The Nokia acquisition was ex-CEO Steve Ballmer's final big deal for Microsoft, and new CEO Satya Nadella has repeatedly deemphasized Microsoft's hardware business as he attempts to refocus the company around software and services. And last year, Microsoft laid off about half the employees it acquired via Nokia.
On the other hand, Microsoft hasn't abandoned making phones entirely, as it continues to market its Lumia line as a low-cost alternative to pricey Apple iPhone and Samsung Galaxy devices to some success - something that wouldn't have been possible without this acquisition.
Still, it's a struggling business for Microsoft.

Mergers & Acquisitions - Google sells off Motorola to Lenova

30th Jan 2014: Larry Page, Google's co-founder and chief executive, likes to talk about "big bets" and "moonshots." But the thing about moonshots is that they can crash to Earth. 

That appears to be what happened t
o Motorola Mobility, the cellphone maker owned by Google. The Internet giant announced Wednesday that it would sell Motorola to Lenovo for $2.91 billion, less than two years after paying $12.5 billion to acquire it. 

Motorola was Google's biggest acquisition by far and was hailed by the company as an example of the big bets Page was unafraid to make. Yet Motorola has continued to bleed money, aggravating shareholders and stock analysts, and its new flagship phone, the Moto X, did not sell as well as expected. 

The deal is not a total financial loss for the extremely wealthy Google. In addition to keeping billions of dollars' worth of patents, Google essentially turned Lenovo into a factory for its Android operating system and also picked up some cash. Still, it is a sign of the fits and starts the company is experiencing as it navigates business in the mobile age, which has upended technology companies of all types. 

In addition to using Motorola's patents to defend itself in the mobile patent wars, Google pledged to reinvent mobile hardware with Motorola's new phones and directly compete with Apple by owning both mobile hardware and software. 

Yet while Google's business depends on phones getting into the hands of more people around the world, it benefits from selling the ads on those phones, not the phones themselves. Selling Motorola is an acknowledgment that Google is better off focusing on its core competencies - making software and selling ads - particularly as the profit margins for phones are shrinking overall. 

"They make their money from people watching YouTube ads and doing searches," said Colin Gillis, an analyst at BGC Partners. "They don't necessarily need to be the hardware maker." 

Still, Google will retain about 15,000 of the 17,000 patents it acquired as part of its original deal for Motorola and will grant Lenovo a license to use certain ones. Analysts have described the patents as the most valuable part of the acquisition, worth several billion dollars alone because they are firepower for Google to defend its Android mobile operating system. 

Although the patents have not proved to be very helpful to Google in patent litigation, they have helped in cross-licensing agreements with other companies, including one Google and Samsung announced Monday. 

Google's share price climbed 2 percent in after-hours trading after the announcement, a day before the company was set to announce its fourth-quarter earnings. 

"Motorola's been a millstone and a drag on results," Gillis said. "You're slipping the millstone off your neck." 

Lenovo, already the world's biggest PC company, is buying itself a toehold in the fast-growing smartphone business during a worldwide slowdown in PC sales and overnight brand recognition in the West. 

In an interview, Wai Ming Wong, Lenovo's chief financial officer, said the deal would feed the company's "PC-plus" strategy. 

"The Motorola handset business comes in very nicely to expand our business further," Wong said. 

Motorola, which has a storied history as the maker of the first commercial cellphone, more recently fell behind rivals like Apple and Samsung. Page announced the deal to acquire Motorola just months after he reclaimed his position as chief executive of Google, and he appointed Dennis Woodside, who previously ran Google's sales and operations, as Motorola Mobility's chief executive. 

Woodside said he would focus on just a few new phones instead of the old lineup of dozens. Yet the phones did not sell as well as expected, and Motorola continued to lose money despite drastic cost-cutting. 

The decision to buy Motorola was "the extravagance of being a company with over $350 billion in market cap," said Jordan Rohan, an analyst at Stifel Nicolaus. "I'm not sure Motorola was fixable, and growth is much easier to come by on a company that's not a fixer-upper." 

Still, Page said Google remained committed to hardware, a business that it has been entering over the past couple years, most notably with Motorola but also with products like Google Glass and companies like Nest Labs, the maker of smart thermostats and smoke alarms that Google acquired this month for $3.2 billion. 

"This does not signal a larger shift for our other hardware efforts," Page wrote in a blog post. "The dynamics and maturity of the wearable and home markets, for example, are very different from that of the mobile industry." 
He also played up the benefits of the sale for Google's Android system, saying that getting rid of Motorola would enable it to focus more on Android and that Lenovo would use Motorola to expand Android globally.

"Lenovo has the expertise and track record to scale Motorola into a major player within the Android ecosystem," Page said.

It is unclear exactly how much money Google lost on the Motorola deal overall. In addition to the patents Google is keeping, Google sold Motorola Home, the portion of the business that made set-top boxes, to Arris in 2012 for $2.35 billion. Motorola also had $2.9 billion cash on hand when Google bought it.

Google is also retaining a small division working on cutting-edge technologies, led by Regina Dugan, who was hired from the government's Defense Advanced Research Projects Agency.

"On the heels of buying Nest and buying all these robotics companies, it makes you worry that they're destroying capital," Gillis said. "But that's what big bets are - some things you lose and this is a losing bet."

Lenovo appears to be building a comprehensive business in computers. Once known primarily as a maker of personal computers, last week Lenovo paid $2.3 billion for a big part of the computer server business of IBM.

Lenovo's shopping spree may be driven by the necessity of moving into other markets. Last year, the world PC market contracted by 10 percent, to 314.5 million units, according to the International Data Corp.

In the smartphone market, Apple and Samsung have taken share from almost all other suppliers. In its home country of China, Lenovo may be concerned about the rise of local smartphone manufacturers.

"It makes strategic sense for both Google and Lenovo," said Andrew Costello, a principal at IBB Consulting. "It will give Lenovo a strong brand in the mobile space outside of China that they don't have today, and it gives them deep operator relationships with AT&T and Verizon. And for Google, they're able to focus on the services side, which is what they're best at, and retain the patent holdings."

Verizon and Yahoo

Internet pioneer Yahoo has finally sealed the deal to sell its core online assets, ending a 20-year run as an independent company. US telecom giant Verizon Communications has bought Yahoo's search and advertising operations today for $4.83 billion. 

The deal marks a dramatic fall for Yahoo, one of the best known names of the early internet era, which had a valuation over $100 billion before the dot-com collapse in 2000 and which in 2008 spurned a $44 billion bid from Microsoft.

Verizon, the US telecoms giant is expected to merge Yahoo with AOL, to create a digital group capable of taking on the likes of Google and Facebook. Verizon bought AOL - another faded internet star -in a $4.4 billion deal last year, which gave it ownership of the Huffington Post, Techcrunch, Engadget and other news sites. 

MicroSoft and LinkedIn

On Monday, June 13, 2016, Microsoft (MSFT) announced it is purchasing LinkedIn (LI) for $26.2 billion in cash, which works out to $196/share, a roughly 47% premium over the immediately previous trading price $133. That’s a generous premium considering it has been a long time since LI was anywhere near their $250/share high on the market. Further, the price dropped in March of this year to $100/share, with no particular way or method of climbing back up. LI’s market is mature, and with 422 million users, it has less than one-half of one percent paying subscribers – an absolutely abysmal conversion rate. They’re already located in so many countries, broadening their reach farther afield likely wasn’t going to be particularly useful. LI simply needed something or someone else to take their gigantic but largely revenue free user base and capitalize on it. I suspect that, being out of ideas themselves, they just decided sale was the best option.
Did anyone else bid, or was Microsoft the only offer?
Based on some general background knowledge and LI’s filings, we can guess a bit of what happened here. After the March plummet, they did one main thing with their shareholder meeting in April: bring in George (Skip) Battle and Michael Moritz as directors. Why? Because these two are individually connected to about 45 of the top companies around, they know everyone with cash to spare or desirable equity (depending on which way the deal is structured), and they have direct phone access to everyone with the seniority and inclination to acquire LI.
Why Microsoft? It was probably an early contender to approach from the start. MSFT tried to buy Salesforce, and they have been on a B2B kick for a while, since their acquisition of Yammer
Answers by Alexandra Damsker, Entrepreneur, recovering lawyer, on Quora: What does the deal look like?

Motives for Acquisitions : Why companies look for mergers and acquisitions

Acquire undervalued firms

Firms that are undervalued by financial markets can be targeted for acquisition by those who recognize this mispricing. The acquirer can then gain the difference between the value and the purchase price as surplus.
While the strategy of buying under valued firms has a great deal of intuitive appeal, it is daunting, especially when acquiring publicly traded firms in reasonably efficient markets, where the premiums paid on market prices can very quickly eliminate the valuation surplus. The odds are better in less efficient markets or when acquiring private businesses.

Diversify to reduce risk

Although diversification has benefits, it is an open question whether it can be accomplished more efficiently by investors diversifying across traded stocks, or by firms diversifying by acquiring other firms. If we compare the transactions costs associated with investor diversification with the costs and the premiums paid by firms doing the same, investors in most publicly traded firms can diversify far more cheaply than firms can.
However in the case of a private firm, where the owner may have all or most of his or her wealth invested in the firm. Here, the argument for diversification becomes stronger, since the owner alone is exposed to all risk. This risk exposure may explain why many family-owned businesses in Asia, for instance, diversified into multiple businesses and became conglomerates.

Create Operating or Financial Synergy

The third reason to explain the significant premiums paid in most acquisitions is synergy. Synergy is the potential additional value from combining two firms. It is probably the most widely used and misused rationale for mergers and acquisitions.

 Take over poorly managed firms and change management

Some firms are not managed optimally and others often believe they can run them better than the current managers. Acquiring poorly managed firms and removing incumbent management, or at least changing existing management policy or practices, should make these firms more valuable, allowing the acquirer to claim the increase in value. This value increase is often termed the value of control.

Cater to Managerial Self Interest (Not so Noble cause but it happens)

In most acquisitions, it is the managers of the acquiring firm who decide whether to carry out the acquisition and how much to pay for it, rather than the stockholders of the firm. Given these circumstances, the motive for some acquisitions may not be stockholder wealth maximization, but managerial self-interest, manifested in any of the following motives for acquisitions.
      Empire building: Some top managers interests� seem to lie in making their firms the largest and most dominant firms in their industry or even in the entire market. This objective, rather than diversification, may explain the acquisition strategies of firms like Gulf and Western and ITT in the 1960s and 1970s. Note that both firms had strong-willed CEOs, Charles Bludhorn in the case of Gulf and Western, and Harold Geneen, in the case of the ITT, during their acquisitive periods.
      Managerial Ego: It is clear that some acquisitions, especially when there are multiple bidders for the same firm, become tests of machismo for the managers involved. Neither side wants to lose the battle, even though winning might cost their stockholders billions of dollars.
      Compensation and side-benefits: In some cases, mergers and acquisitions can result in the rewriting of management compensation contracts. If the potential private gains to the managers from the transaction are large, it might blind them to the costs created for their own stockholders.

Snapdeal calls off merger with Flipkart; to tweak biz model, lay off staff

Online retailer Snapdeal has scrapped a proposed merger with bigger rival Flipkart after months of negotiations and will now tweak its business model, cut costs and slash headcount in a bid to revive its fortunes.
“Snapdeal has been exploring strategic options over the last several months. The company has now decided to pursue an independent path and is terminating all strategic discussions as a result,” the e-tailer said in a statement on Monday.

Snapdeal had engaged with Flipkart on a merger for the past six months at the behest of its biggest investor, Japan’s SoftBank Group Corp., after a few unsuccessful attempts to raise capital. The Delhi-based e-commerce firm, which trails Flipkart and Amazon, first explored a merger with rivals about a year ago. It later carried out a rebranding exercise, slashed its workforceand started serious talks with Flipkart for a sale.
However, six months of excruciating discussions culminated in both camps calling off the merger thanks to differences between SoftBank and Snapdeal founders, besides several clauses put forward by Flipkart.
Snapdeal’s announcement to call off the deal comes a week after its board, which includes representatives of investors SoftBank and Nexus Venture Partners as well as its founders, agreed to negotiate with Flipkart on its revised offer of around $900 million.

Snapdeal, which sold its digital payments unit FreeCharge for $60 million to Axis Bank last week, plans to divest its logistics arm Vulcan Express soon. After raising fresh capital by selling these subsidiaries, the company wants to chart out a new journey that it calls Snapdeal 2.0.

A Snapdeal spokesperson said in the statement that the company has made “significant progress” towards executing its new strategy by achieving a gross profit this month. “With the sale of certain non-core assets, Snapdeal is expected to be financially self-sustainable,” the statement said.
Separately, founders Kunal Bahl and Rohit Bansal, in a letter to employees announcing the termination of merger talks, said: “There isn’t going to be one successful model for e-commerce in India. In every market, there are multiple successful e-commerce businesses, and as long as one’s strategy is differentiated and has a clear path to success, there is a great company that can be built.”
They claimed the new business model that the company had rolled out a few months ago was already profitable at the net margin level.
SoftBank, which was looking to acquire a stake in Flipkart through the planned merger, said in a statement that it “respects the decision to steer the company in a different direction”.
“We look forward to the results of the Snapdeal 2.0 strategy, and to remaining invested in the vibrant Indian e-commerce space,” the Japanese investor said.

Snapdeal 2.0
Two people with direct knowledge of the company’s plans said Snapdeal now wants to position itself as a “true marketplace” without any inventory.
“This will be a seller-centric marketplace similar to Alibaba-owned Taobao in China and eBay in the US. The management has been working on this plan for the past two months,” one of the persons said on the condition of anonymity.
The company had briefly courted the idea of merging with Infibeam but did not make any substantial progress in this regard. “With all strategic conversations coming to an end the company can now focus on the actual business,” the person said.
However, this move would entail further downsizing of its operations and workforce. The second person said the company would eventually end up with fewer than 200 people. The e-tailer is estimated to have around 1,500 employees currently.

Snapdeal, which originally began as a discount coupon seller 10 years ago, had gone through several changes in its business model. It later transitioned into an online deal site. By 2012, it had adopted a pure marketplace model without managing its own inventory.
“There are certain advantages of the inventory-led model but they come at a crazy cost. To me, inventory is just a very expensive way of marketing,” Bahl had then told VCCircle in an interview defending his zero-inventory model.

After raising around $1.65 billion from SoftBank, Alibaba and other investors, Snapdeal pivoted to the capital-intensive inventory-led model. But this has not quite worked out and the company is now returning to the earlier model, which was championed by its erstwhile investor eBay.
eBay itself failed against Flipkart and Amazon in India and it rolled its India business into Flipkart earlier this year with the US parent putting in additional money into the homegrown e-tailer. acquisition by IBibo

Tickets used to be booked through the traditional brick-and-mortar agents till 2005. That is when BITS Pilani alumni Phanindra Sama, Sudhakar Pasupunuri and Charan Padmaraju started Redbus, to sell bus tickets online.
The idea emanated from an experience that Phanindra had in the winter of 2005 in Bangalore, when he struggled to book bus tickets to make it home for Diwali and spend the vacations with his family. Diwali is one of the peak times in the year and every single bus agent in the city seemed to be booked and he could not make it to home in time. Phanindra realised the need for a convenient, hassle-free portal where customers could book their tickets from the comforts of their home. An additional benefit of RedBus was the fact that you could book your ticket for the return journey in advance without having to travel to the destination with the uncertainty of securing a ticket looming over your head. RedBus would provide the same convenience that customers enjoyed while booking tickets for trains or flights to the bus transport business. Phanindra took the idea to his college friends and colleagues and that was the beginning of RedBus.
 Phani explains, "Your travel agent may say that the last bus for Cochin today is at 8pm, because that's the last bus of the operator he works with. That doesn't mean there isn't a bus for 10 or 11 pm from another operator. Also, the return ticket is something you'll get only from the place where you visit.RedBus solves these problems by allowing consumers to look at availability across all the operators and book in advance, even across state lines. "We even give a layout of the bus seating, and if you want a return ticket from the present destination, we update our inventory online at the final destination and you can get your ticket,"
Phani and his two co-founders undertook extensive market surveys to understand the market and the aspirations of the customers. Once they felt they understood the business, they developed a plan for the business and submitted it to a TiE (the Indus Entrepreneurs) mentorship competition - where they were among the three winners. The portal was created with the help of the initial seed funding and mentoring that was provided by the competition.
RedBus also sells two cloud based software, called BOSS and Seat Seller which it developed in-house, to bus operators (for managing their operations), and travel agents (to aggregate and sell tickets across multiple operators)
In June 2013, Phanindra Sama and Charan Padmaraju, the engineers from Andhra Pradesh who created the bus ticketing service redBus, sold their stake in the venture to the Ibibo Group, a subsidiary of South Africa's Naspers.

Other investors in the company - SeedFund, Kanwal Rekhi's Inventus, and Helion Ventures  also exited for what is said to be an enterprise value of Rs 600-700 crore, making it the biggest overseas strategic acquisition of an Indian internet asset. Estimated value of the deal was said to be Rs 800 crore

Sri Chaitanya Educational Group obtains PE

New Silk Route, a leading private equity firm with USD 1.4 bn of AUM, has invested up to $ 25 mn in Hyderabad-based Sri Chaitanya Educational Group, which claims to be the country’s largest network of private schools and junior colleges.
It is learnt that the money will be infused into the comany in various tranches for a 35%-40% stake in the group, which seems to have been valued at somewhere between Rs 2800 to Rs 3500 crores.
Sri Chaitanya runs around 160 institutions, mostly in Andhra Pradesh, including 116 schools and junior colleges. Started with a small junior college in Vijayawada in 1986, the group has expanded into 7 states and has become the most trusted education brand in Andhra Pradesh.

K12 Techno Services (Gowtham Model Schools) attracts PE

K12 Techno Services Pvt Ltd, runs 70 Gowtham Model School units in Andhra Pradesh.

PE  investment of Rs 75 crore made in July 2010, has been jointly put by Sequoia and SONG Investment Advisors in an 80:20 ratio. Second round funding of Rs 25 crore was made in March 2011.With this, Sequoia-SONG hold 49 percent in K12 Techno Services while the rest is with the promoters.

K12 Techno Services managing director M Venkatnarayana said the funds would be used to open 25 new schools, upgrade infrastructure and invest in teacher training this year. It is in talks to open 30-40 schools in Orissa, Chhattisgarh, Maharashtra and Karnataka next year. It has tied up with Brilliant Tutorials for partnership in IIT-JEE preparatory courses, with CfBT Education Trust (UK) for teacher training and the Indian School of Business for training school principals in business management.

Sequoia has invested in two other education ventures, TutorVista and Brainvisa, apart from K12 Techno Services.
According to its managing director GV Ravishankar Sequoia Capital India Advisors Pvt Ltd. the education sector is worth $40 billion, but it was a tough-to-execute market.

Tirumala milk Acquisition by Lactalis

Lactalis World’s largest dairy player agreed to buy Indian dairy producer Tirumala Milk Products Pvt. from  private equity firm Carlyle Group and its promoters, in its first acquisition in the South Asian nation.

Lactalis will take over 100 percent of the Indian company and retain the existing management. Carlyle, the world’s second-biggest buyout firm, invested $22 million in the Indian company in 2010.

Shankar Narayanan, Managing Director, Carlyle India, said that Carlyle’s investment in Tirumala exemplifies its ability to partner with entrepreneurs to create value for all stakeholders. During Carlyle’s investment, he added that the company’s revenues grew two-and-a-half times and profits more than quadrupled.

We are extremely happy to have partnered with Carlyle, who provided numerous value creation activities and acted as a catalyst in the growth of the company over the past few years. 

The deal will help Lactalis reduce its reliance on Europe, where it gets 60 percent of its revenue.

Foreign companies announced $15.6 billion of acquisitions in India last year, up from $11 billion in 2012, according to data Bloomberg compiled.

“India is an important place of opportunity for the development of the group worldwide,” Nalet said. “With the size of Tirumala today we think we have a good opportunity for the development of the Indian dairy market.”

India was the No. 3 producer of liquid, or non-powdered, cow’s milk in the world in 2013, behind the European Union and U.S., according to the U.S. Department of Agriculture.

Hyderabad-based Tirumala’s sales for the year ended March 2013 was 14.24 billion rupees ($229 million), according to its website. It had net income of 700 million rupees in the year. The company has seven plants across south India, and Lactalis will help expand the company in both north and South India, said Danda Brahmanandam, Tirumala’s founder and managing director.

Tirumala is the second-largest private sector dairy producer in southern India, Brahmanandam said.

Carlyle had invested around $1.1 billion in India as of Sept. 30, according to a December statement. Carlyle will invest in strong owner driven companies in sectors including consumer, health-care, technology and engineering services, said Carlyle India Managing Director Shankar Narayanan said in a phone interview from Mumbai today.

SKS Micro finance/Bharat Financial Acquisition by Indus Ind Bank

Sep 2017: The about 12-year-old journey of Bharat Financial Inclusion Ltd, formerly known as SKS Microfinance, has been tumultuous.
It suffered its biggest blow after the then undivided Andhra Pradesh promulgated a state law to severely restrict microfinance activity because of a spate of suicides by borrowers in late 2010, allegedly driven by coercive loan recovery practices. Subsequently, management differences saw the exit of its founder Vikram Akula and the central bank denied the microlender's claim to run a small finance bank (SFB).
Bharat Financial overcame the stress and has since improved its profitability. But it now faces a potential takeoverby the private sector lender IndusInd Bank, which some experts say is the only way for the survival of the microlender. The changing regulatory space has shrunk the microfinance industry to only three large companies, including Bharat Financial. Bharat Financial started its journey as a non-profit in 1998. Founded as Swayam Krishi Sangam by Vikram Akula, it later morphed into a non-banking financial company (NBFC) in 2005.
The microlender along with its peers saw unprecedented growth because of the reluctance of banks to serve the financial needs of poor customers who were not part of the formal banking system.
Five years later, it became the only microfinance lender to be listed on stock exchanges. In August 2010, Akula steered the initial public offering, which was subscribed almost 14 times. The success of SKS led to talks that other companies in the sector may also tap capital markets
The party was, however, short-lived, not only for the company but also for the microfinance industry.
The suicides in Andhra Pradesh led to the state government putting severe restrictions on microlenders in a state that then accounted for a fourth of the industry's business.

Andhra Pradesh enacted a law greatly limiting the ability of microfinance companies to lend and recover their loans in the state. Operations of most MFIs came to a near halt. SKS was one of the worst hit due to the crisis.
In September 2010, just before the microfinance crisis unfolded, SKS's exposure to Andhra Pradesh was at over 27% of its total loan book, its highest in any state. In October that year, 30 poor women borrowers in Andhra Pradesh committed suicide within a period of 45 days. Among these 30 women, 17 were then reported to be borrowers of SKS Microfinance.
In the years that followed, SKS Microfinance provided fully for the outstanding exposure in Andhra Pradesh, wrote off exposure of Rs1,360 crore in the state, and stopped fresh disbursals there.
"It (AP crisis) had a long-lasting adverse impact but BFIL (Bharat Financial) was an exception. We met all our commitments to lenders including to banks on time and never went into CDR (corporate debt restructuring) structure," said non-executive chairman P.H. Ravikumar.
Today, a chunk of SKS's assets are in Odisha, Bihar, West Bengal, Karnataka and Maharashtra.
While most believe that the industry has managed to survive the Andhra crisis, the recent loan waivers announced by the state governments of Maharashtra, Uttar Pradesh (UP) and Karnataka could trigger another round of defaults in repayments. "The market at large, particularly investment community, feels that for MFIs, Andhra Pradesh like event or UP or Maharashtra election like scenario which adversely affect their operations is going to be a periodic recurring feature. This increases the credit costs," Ravikumar said.
A year later in November 2011, Akula exited the company, allegedly owing to differences with the board.
This happened amid a changing regulatory framework.
As a fallout of the Andhra crisis, in December 2011, the Reserve Bank of India (RBI) put in place regulations based on the recommendation of a high-powered committee headed by Y.H. Malegam, a member of the central bank's board. The norms capped the margin between the cost of borrowing and the price at which loans were given, and interest rates and loans were regulated.
Despite this, the company maintained its growth momentum. Assets under management, consisting of non-Andhra exposure, grew at a compounded annual growth rate of 46% between fiscal 2013 and 2017. As of June-end, its non-Andhra Pradesh portfolio grew 14% year-on-year to over Rs9,630 crore.
Following the Andhra crisis, the company reported losses due to loan write-offs and a shrinking credit book. From the December 2011 quarter, when losses peaked to around Rs428 crore, the lender swung back to profit a year later. However, demonetization also impacted the collection of loans, which forced the lender to make higher provisions, resulting in losses.
With improving collection, its net loss narrowed to Rs37 crore in the June quarter from Rs235 crore a quarter ago.
Even as things look normal, Bharat Financial faced another hurdle with the central bank killing its banking aspiration. In September 2015, RBI handed out in-principle SFB licences to 10 applicants, eight of which were microfinance lenders. SKS Microfinance was left out.
According to Vikram Akula, the central bank's decision puzzled him because the lender seemed to meet all the criteria for an SFB. "Perhaps it was the RBIs discomfort with the current management team," he said on Monday.
Dilli Raj, the then president of the company, was under the scanner of the Enforcement Directorate in a complaint filed by IDBI Bank against First Leasing Company of India, where he worked previously.
The conversion of MFIs into SFBs and RBI regulations are also being seen as reasons for the fall of the MFI industry.
Regulations on loan spread and lending has been unfavourable for the micro lending industry. For instance, MFIs are not allowed to lend to a borrower who already has two loans but is not applicable to banks. SFBs have access to low-cost deposits, which gives them advantage of lower cost of funds. MFIs are not allowed to access deposits.
According to Bharat Financial's Ravikumar, the banks and SFBs today already have 70% share in the overall microfinance lending in the country and trends indicate that in another two or three years that share of MFIs would be less than 20-25% from 30% currently.
Monday's announcement by IndusInd Bank about the merger talks with Bharat Financial follows months of speculation. Several banks as well as non-banking financial companies were rumoured to be either picking-up a strategic stake or taking over the company.
According to analysts, most of the talks were based on the fact that a bank partnership would give the microlender a leverage to expand its horizon into other loan products such as gold credit, two-wheeler loan.
Akula, former head of Bharat Financial, said that it appears to him that the RBI has decided to focus on expanding financial inclusion through focusing on banks rather than through standalone MFIs.
"In light of the history of political backlash against standalone MFIs, I think this is a prudent tactical move. I just would like to see the RBI accelerate this process so that all standalone MFI-NBFCs move under the umbrella of a bank, either by becoming SFBs or merging with a bank," he said.
When asked if merger is natural choice for Bharat Financial given the challenging environment, Ravikumar did not offer any comments.
If the Bharat Financial-IndusInd Bank merger deal goes through, Grameen Koota Financial Services Pvt. Ltd, and Satin Creditcare Network, which are the other two large microlenders, will be the ones left in the space.
Jindal Haria, associate director, financial institutions, India Ratings and Research said, There are over 40 NBFC-MFIs in the country. It is a given that there will be further consolidation in the sector. "Given that private banks are looking for a way to reach the microfinance and missing middle customers and hence would gain from the distribution networks that MFIs have set up. It also could be an easy source of PSL. For MFIs, We are already seeing that the customer acquisition in urban areas is in single digits for most of them and in very few rural pockets it is over 20%." He further added, "They may have to evolve their loan products and may not be able to maintain high growth in group loan products without increasing borrower leverage. Hence there is clear synergy between banks and MFIs."

SEP 01, 2018,
Beverage giant Coca-Cola’s global $5.1-billion buyout of Whitbread Plc owned UK café chain Costa Coffee has set the world’s biggest soda maker in direct competition with coffee giants such as Starbucks and Nestle, as it looks to hedge its risks in a sluggish soft drinks market and broaden its portfolio beyond sugary drinks.
“Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide,” Coca-Cola president James Quincey said in a statement. “Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market with a strong coffee platform.”

Analysts said the deal will give Coca-Cola a scalable coffee platform across parts of Europe, the Asia-Pacific, the Middle East and Africa, with the opportunity for additional expansion, besides expertise in coffee supply chain, sourcing, vending and distribution. CocaCola’s own coffee brand, Georgia, remains small. Coca-Cola is urgently broadbasing its portfolio beyond its core sugary drinks to retain consumers switching to healthier drinks. The acquisition is to close in the first half of 2019 once all approvals are received. Whitbread said Friday that it would focus on its hospitality businesses under the Premier Inn franchise in the UK and Germany. It acquired Costa Coffee for £19 million in 1995.

Success stories of Mergers and Acquisitions

2 stories to begin with 
1. Nokia refused Android 
2. Yahoo refused Google 

Story Over 
Lessons Learnt
1. Take risks
2. Embrace changes 
3. If you refuse to change with time, you might perish 

Ok 2 More stories 
1. Facebook takes over whatsapp and instagram
2. Flipkart takes over Myntra and flipkart owned Myntra takes over jabong 

Story Over

Lessons learnt
1. Become so powerful that your competitors become your allies
2. Reach the top position and then eliminate the competition
3. Keep innovating

2 More stories 
1. Colonel sanders founded KFC at the age of 65
2. Jack Ma, who coudnt get job in KFC, founded Ali baba

Story over 

Lessons learnt
1. Age is just a number
2. Only those who keep trying succeeds

Last but not the least 
1. Lamborghini was founded as result of revenge of a tractor owner who was insulted by Enzy Ferrari, the founder of ferrari

Story Over 

Lessons learnt
1. Never underestimate anyone, ever !! 
2. Success is the best revenge

Just keep working hard !! 
Invest your time wisely !! 
Do what pleases you !! 
Dont be afraid to fail !!!

Joint Ventures
Tata - Docomo
NTT Docomo and Tata Teleservices (TTSL) runs the Tata Docomo brand in India. After their joint venture, started posting continuous losses, TTSL was ordered to pay $1.17 (~Rs 7,538.89 crore) billion in damages to NTT by a London court in June last year. NTT paid Rs 12,924 crore in 2009 for an initial 26% stake in TTSL.
According to Tata’s proposal made to the CCI, it will “acquire equity shares of TTSL comprising 21.63% of the paid-up equity share capital” owned by “Docomo pursuant to certain consent terms entered into between Tata Sons and Docomo.” Tata did not expand about consent terms set between it and NTT Docomo in the proposal.
The stake buy-back is a settlement for the lengthy legal battle between Tata Sons and NTT Docomo. The terms of the agreement between Tata and NTT Docomo had an option for the acquirer (NTT Docomo) to request a suitable buyer for at least 50% of the acquired price, in case the joint venture turns non-profitable. Tata, however, ran into trouble with RBI regulations over foreign exchange trade when it tried to settle ts payment. RBI told the HC in March that Tata’s payout of $1.17 billion in damages to the Japanese telco cannot be approved, and is illegal since it involves the transfer of shares to a foreign company. However, Tata used the CCI route to settle its dispute by buying back shares owned by NTT Docomo.

Tata Sons, the promoter of Tata Teleservices has received approval from the Competition Commission of India (CCI), to buy back 21.6% stake owned by Japan’s NTT Docomo.

SalesForce and MuleSoft

$6.5 billion acquisition that everyone hated a year ago was the only thing everyone loved about Salesforce's latest quarter   ROSALIE CHANMAR 6, 2019, 07.17 AM

Salesforce acquired MuleSoft  in 2018 for a whopping $6.5 billion, the largest deal in the company's history. The big-ticket deal raised plenty of skepticism at the time, especially since MuleSoft didn't fit neatly into Salesforce's customer relationship management business. Salesforce's stock sank about 5% in the immediate aftermath of the deal.
On Tuesday, UBS analyst Jennifer Swanson Lowe called MuleSoft a "standout" in Salesforce's final quarter of the year.
MuleSoft generated $181 million in total revenue, including $156 million in subscription and support revenue, during Salesforce's fiscal fourth quarter.
"This came in far ahead of our initial guidance as we quickly executed on our plans to integrate MuleSoft and accelerate digital transformation projects for customers around the world," SalesforceCFO Mark Hawkins said on the earnings call.
Hawkins said that this quarter was MuleSoft's "largest quarter of the year," but its products are more seasonal and may see some revenue declines depending on the quarter. However, Salesforce still sees much potential for MuleSoft. In the past year, Salesforce hired 450 new employees for MuleSoft.

Mindtree acquisition by LT

Larsen and Toubro has bought the 20.32% stake at Rs 980 per share in Mindtree from early investor V G Siddhartha, after a lot of noise and the firing of a warning shot by promoters of the mid-tier IT services firm.

The Rs 3,269 crore deal was signed on Monday night and gives exit to investor VG Siddhartha

Engineering giant L&T is expected to spend as much as Rs 5,039 crore in an open offer to increase its stake to 51% and wrest majority control of the IT services firm, which would remain an independent listed entity. It is offering investors Rs 980 per share in the open offer, L&T and Mindtree disclosed separately on the BSE.

L&T has also advised its broker Axis Capital Ltd to buy as much as 15% shares from the open market to the tune of Rs 2,434 crore. With this, L&T is looking to increase its stake to 66.32% in Mindtree.

PVR to acquire SPI Cinemas
Published AUGUST 12, 2018

PVR Ltd. will buy SPI Cinemas, south India’s largest cinema chain and owner of the iconic Sathyam Cinemas in Chennai in a transaction valued at 850 crore

The deal would help PVR, which is listed on the stock exchanges, strengthen its base in Tamil Nadu, a key movie market.

As per the terms of the proposal, PVR would buy 71.7% stake in SPI Cinemas from existing shareholders for a total consideration of 633 crore. Further, PVR would issue 1.6 million shares or 3.3% shares in PVR as part of the transaction. Based on PVR Ltd.’s closing share price of 1,317.20 on Friday, the 3.3% stake amounts to 210.75 crore. Overall, the cash and stock transaction is valued at 843.75 crore. PVR currently operates a cinema circuit comprising 638 screens at 137 properties in 54 cities (19 States and UTs), serving 76 million patrons annually.

Post-transaction, PVR’s total screen count will increase to 706 screens across 152 properties and 60 cities.

The acquisition will also propel PVR as the seventh-largest cinema exhibitor in the world in terms of annual admissions at its theatres, which will be in excess of 100 million, according to a statement.

As on March 2018, SPI had total assets of ₹319.63 crore and a turnover of ₹309.60 crore. Ajay Bijli, chairman-cum-managing director, PVR Ltd., said the transaction is a significant step in helping the firm achieve its goal of 1,000 screens by 2020.

The statement added there was also a provision for the customary call/put option for the firm to buy the remaining 28.31% stake in SPI from SS Theatres LLP at an aggregate price not exceeding 300 crore, if triggered

Business Today speaks with Ajay Bijli, chairman and managing director of PVR, about how the multiplex chain : March 13 2015

The Indian movie exhibition industry was in the thick of action in 2014 with many acquisitions in the multiplex business. All the big players - PVR, Carnival, INOX and Cinepolis - are also betting big on small towns with malls. Ajay Bijli, chairman and managing director of PVR, speaks with Arunima Mishra about how PVR Cinemas, the largest chain of multiplexes in India with 462 screens, plans to maintain its leadership position. Excerpts:
Q. Besides having the first-mover advantage, what else would you attribute to PVR's leadership?
A. My father had a trucking company first and he struggled in the trucking business. My father used to be in arbitration. In one of the arbitrations, the settlements were such he couldn't find a way to settle it but told the multiple owners of Priya: "If you guys are fighting amongst each other, let me just buy it". I was interested in cinemas and I thought I could look at the single-screen cinema at Priya [in south Delhi]. I used to play Hollywood films there first as that catchment was attuned to that. Most cinemas at that time looked drab; the designs were not very exciting. I started asking whether the cinemas could look exciting as people watch movies and what could we do to make the space outside the cinema hall - toilets, concessionaire and gangways - exciting and vibrant, so that people should feel that they can't get the experience at home.
I did not know that the habit of watching movies will one day turn into a business. Because the family had a property, because I was unsettled a little bit in the trucking business and said "Can I do something to Priya rather than run the trucking business?" And the single screen did so well that it encouraged me to get into multiplexes. As Priya was doing so well, I did not want to break something that is doing really well.
And, quality must result in good revenue, EBIDTA margins, profitability - only then you are also respected among shareholders. Happy customers lead to happy shareholders - that's our philosophy.
Q. Now everyone wants to be in the race to be the big player, if not by building cinemas then by acquiring them. How's PVR reacting to it?
A. The number of screens is not the only parameter to measure leadership, which we already have the highest now [462 screens]. I'm driven by a qualitative approach because we have investors and shareholders. Rather than just saying leadership, scale is very important. Then only you get the economies that improve your margins. Whether it's negotiating with producers and distributors for the film, if one has the scale, one gets better deals. This will ultimately improve one's bottom line. And, of course, who doesn't like leadership. It does come with a responsibility. I'm not complaining about it... You just can never rest on your laurels; you can never take your position for granted.
We will be opening organically about 100 screens a year, there's a certain pace at which malls are developing, cinema screens are coming up. There are a lot of players who are fighting for it. There's INOX, Cinepolis, who are also trying to get those screens. But, currently, we are sure that most mall developers prefer PVR as an anchor tenant over anybody else. Hopefully, we will be in the leadership position.
Carnival is a new player. They are growing more inorganically than organically. They have taken the acquisition route. Again, we should not underestimate anyone.

Q. How profitable has the Cinemax story been? Any takeaways? What's next besides Sathyam?
A. It's about scale, focus, core competence and core business. Everybody has got a reason to be in the business; and a reason to get out of the business. The acquisition is co-incidental. I never imagined that so many acquisitions will happen in one go. Everybody who has exited, it appears that it was not their core business. Kanakias are the ones from whom we bought Cinemax; their core business was real estate and at some point of time they realised it was time to exit. Somebody gets good valuation, they exit. Or if someone has got more passion to follow something else, they exit.
We are open to acquire any of the other leaders if they are also open. We are completely growth driven; if it [a deal] is at the right price, a right fit, then why not?
The largest companies in the world are much larger than what we are. Regal Cinema, the largest in the world, is 7,000 screens; there's AMC in China with 5,000 screens. In a country like India, which is grossly under-screened and there is plenty of potential to open more screens, we will be open to acquisitions at the right price. We are, however, not open to acquiring single screens because I feel the world has moved on.

Q. How is PVR looking at building its brand recall in the markets it's entering? Also, does a movie-goer choose a cinema over another for the brand value or it's the pricing and content?
A. It's evident from the five to six films that release every week, people want to have variety under one roof. The debate about single screens and multiplexes is long over now. Single screens are 1,000 plus seats, which are difficult to fill up and they don't have the infrastructure of car parking. Few single screens have a similar experience like multiplexes. Consumers want to have a variety of things. They want to eat, relax etc.
To talk about smaller towns - in Bhopal we have opened just now, and in a mall in Jalandhar also. Even in smaller towns - Raipur, Bilaspur, Ranchi, Bokaro - malls are the shopping and entertainment destinations. We would rather be there than anywhere else. Our strategy is to be there in malls.
As far as a moviegoer is concerned, it's difficult to articulate. Beyond a point, the consumer is emotional about the brand... I'm not looking at attracting consumers on the basis of wider seats, better technology... That's a table's takeaway anyway. It has to be the overall package.

   The PVR-INOX Merger

On March 27, 2022, PVR Limited ("PVR") announced that it proposes to merge with INOX Leisure Limited ("INOX"). Pursuant to the merger, the shareholders of INOX will receive shares of PVR at the approved share exchange (swap) ratio (the "PVR-INOX Transaction").

While existing screens of PVR and INOX are proposed to continue their present branding (i.e., 'PVR' or 'INOX', respectively), new cinemas opened following the merger will be branded as 'PVR-INOX'. The PVR-INOX Transaction is expected to bring together two of India's largest cinema brands with a combined network of more than 1,500 screens.1

Ordinarily, a deal of this magnitude would require the prior approval of the Competition Commission of India ("CCI"). In fact, PVR's acquisition of 39 screens from DT Cinemas (the "PVR-DT Transaction") in 2016 also required the approval of the CCI.

However, owing to the decreased revenues of the parties (and the cinema industry generally) caused by the pandemic, the PVR-INOX Transaction has been able to benefit from a revenue based statutory exemption to CCI approval requirements.

Market Positions of PVR and INOX

According to the press release issued by PVR, it currently operates 871 screens in 73 cities and INOX operates approximately 675 screens across 72 cities. The combined entity is headed to become the largest film exhibition company in India operating 1,546 screens across 109 cities.2

Based on publicly available information, the combined entity will have around 50 per cent multiplex screen market share and around 42 per cent box office collection market share.3

The creation of such an entity, particularly given that its market shares will cross 50% on a nation-wide basis, could potentially have effects on competition in the markets where the parties are present.

Review of Transactions by the CCI

The CCI was established under the Competition Act, 2002 ("Competition Act") to prevent practices that have an appreciable adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets in India.

Transactions involving enterprises which cross certain asset and turnover values (as prescribed under the Competition Act), are required to be notified to, and approved by the CCI prior to completion (unless any exemptions apply).

Pursuant to an exemption notified by the Ministry of Corporate Affairs, transactions are exempt from the approval requirements under the Competition Act where: (a) the value of assets being acquired, taken control of, merged or amalgamated is not more than INR 350 crore in India; or (b) the turnover of the target (i.e., the enterprise whose control, shares, voting rights or assets are being acquired) or the turnover attributable to the assets being acquired, taken control of, merged or amalgamated (as applicable), is not more than INR 1,000 crore in India (the "Target Based Exemption").4 Recently, the applicability of the Target Based Exemption was extended to March 2027.5

Based on the financial statements for the year ended 2020-21, the revenue for PVR was INR 280 crore6, and INOX was INR 106 crore7. These revenue numbers are below the thresholds provided in the Target Based Exemption, and allow the PVR-INOX Transaction to be exempt from notification and approval requirements under the Competition Act.

As stated above, in 2016, the CCI reviewed the PVR-DT Transaction and found that it was likely to have an appreciable adverse effect on competition in India due to a large increase in market shares in certain locations such as Noida, Gurgaon, and South Delhi. Therefore, the CCI directed divestiture of 7 screens belonging to DT, along with other commitments to be undertaken by PVR, prior to the completion of PVR-DT Transaction.8

Given that the Competition Act does not grant the CCI powers to examine transactions that are exempt from approval requirements, the PVR-INOX Transaction is unlikely to be reviewed by the CCI.

However, the subsequent conduct of the combined entity could be examined under the provisions relating to (i) the abuse of dominance under Section 4 of the Competition Act (for example, by way of imposing unfair prices or conditions) or (ii) anti-competitive agreements under Section 3(4) of the Competition Act (including, for example, with respect to tie-in arrangements, exclusive agreements, etc.)

Accordingly, it appears that due to revenue losses owing to the pandemic, the PVR-INOX Transaction will escape the CCI's scrutiny, and could result in an asset heavy company that would otherwise have been subject to the CCI's view on whether divestitures are needed based on competition concerns.

Adani Ports Strengthens presence on the Eastern Coast

Gautam Adani-led Adani Ports and Special Economic Zone Ltd (APSEZ) will buy a 75 per cent stake in Krishnapatnam Port Company Ltd, the entity that runs a private deep-water port at Krishnapatnam in Andhra Pradesh's Nellore district, for 13,500 crore.
Business Line was the first to report on the deal in its edition dated August 19, 2019.
The deal is APSEZ's biggest acquisition yet in India's port sector in terms of value and size and helps it build scale in an industry that is dominated by the 12 state-owned ports.
The acquisition, finalised today, fits well with the Group's strategy to take-over stressed assets, said a person briefed on the deal.
The acquisition will give APSEZ, India's biggest private port operator, access to the country's largest waterfront area (for a port) of 12.5 kms and a transit storage area of 6,800 acres. The port started operations in 2008.
Krishnapatnam, a port owned by the Andhra Pradesh government, was given to the Hyderabad-based CVR Group for development and operations on a 30-year contract beginning September 2004. The port contract can be extended up to 50 years (30+20 years).
Chinta Sasidhar, the managing director of Krishnapatnam Port Co Ltd and the youngest son of C Visweswara Rao, its chairman, will continue to hold the balance 25 per cent stake in the port operating company.
Currently, the port has a draft of 18.5 metres, a depth that can accommodate full-loaded Capesize vessels of 200,000-tonne capacity.
The port, located 180 kilo metres north of Chennai, currently has a capacity to handle 92 million tonnes (mt) of cargo from 10 berths, including 67 mt of bulk cargo and 2 million twenty-foot equivalent units (TEUs) of containers which is equivalent to 25 mt.
The port handled 54.37 mt in FY 19 including 506,168 TEUs.
The port has applied for environment and coastal regulation zone (CRZ) clearances to expand capacity further.
Krishnapatnam Port Company is 90.6 per cent owned by the CVR Group, which has interests in construction, ports, power, steel, information technology and exports.
London-based private equity firm 3i Group Plc invested $161 million in the port operating company in February 2009 through its India Infrastructure Fund for a 26% stake. 3i's stake has since dropped to 9.4 per cent due to change in valuations and rupee depreciation.
The deal will give 3i an exit route for its investment over which it has been wrangling with the CVR Group for some time.
This will be APSEZ's third acquisition on the eastern coast after the purchase of Dhamra port in 2014 and Kattupalli port in 2016.
The deal will also help APSEZ expedite the vision of handling 400 million tonnes (mt) of cargo by 2025 and expand its market share among India's ports.
The proceeds will be used by the CVR Group to settle lenders' dues, a person briefed on the deal said.
In FY19, APSEZ loaded a combined 207.7 mt of cargo, clocking a growth of 15 per cent over FY18. The standalone port business earned 8,897 crore in FY19 and a net profit of 4,006 crore.
APSEZ's 10 strategically located ports and terminals — Mundra, Dahej, Kandla and Hazira in Gujarat, Dhamra in Odisha, Mormugao in Goa, Visakhapatnam in Andhra Pradesh, Kattupalli and Ennore in Tamil Nadu — have the capacity to handle a combined 395 mt of cargo, accounting for 24 per cent of the country's total port capacity.
APSEZ is also developing a container transhipment port at Vizhinjam in Kerala and a container terminal at Yangon in Myanmar.
Krishnapatnam is Adani's second acquisition in the port logistics space in less than a week after the purchase of Snowman Logistics Ltd for 296 crore on December 27

WhiteHat Jr acquired by Byju
Think and Learn which owns and operates education technology platform Byju’s — The Learning App — has acquired Mumbai-based WhiteHat Jr in a $300 million all-cash transaction, according to an announcement late Wednesday evening.

WhiteHat Jr, founded in 2018 by Karan Bajaj, the former CEO of Discovery Networks India, operates in the K-12 segment, teaching students to code and helping them build commercial-ready games, animations and apps, using the fundamentals of coding.

The startup has developed a proprietary coding curriculum, focused on product creation, and imparts lessons through live, interactive online classes. It claims to be clocking a revenue run rate of $150 million. DC Advisors acted as the exclusive financial advisors to the transaction.

According to an official statement released by Byju’s, it will make significant investments in WhiteHat Jr’s technology platform, product innovation while expanding the teacher base to cater to demand from new markets. Bajaj will continue to lead and scale this business in India and the US.

WhiteHat Jr is the leader in the live online coding space. Karan has proven his mettle as an exceptional founder and the credit goes to him and his team for creating coding programs that are loved by kids. Under his leadership the company has achieved phenomenal growth in India and the US in a short span of time," said Byju Raveendran, founder and chief executive of Byju's.
The closure of the deal comes even as Byju's is reportedly in advanced stages of negotiations to acquire Doubtnut, a two-year-old learning app, for as much as $100-$150 million, in what is also expected to be an all-cash transaction.

The purchase of WhiteHat Jr is also the largest acquisition, till date, by Byju's . It had previously acquired Osmo, a US-based learning platform, for which it paid $120 million, in January 2019. At the time, the deal was said to be part of the Bengaluru-based firm's plan to aggressively expand internationally. Before that, Byju's had acquired Math Adventures, TutorVista and Vidyarth.

The Bengaluru-based unicorn, which is valued between $10-$10.5 billion, has also been on a fundraising spree over the course of the current calendar year. Earlier this week, Bloomberg reported that DST Global, the investment firm led by Israeli-Russian billionaire Yuri Milner, was in advanced stages of investing an estimated $400 million into the company.


TR Foods owner Orkla to acquire Eastern Condiments

In a major development in the food and beverages industry, Norwegian consumer conglomerate Orkla ASA that also owns MTR Foods is set to acquire one of South India’s leading spice makers, Eastern Condiments. Orkla will pick up 68 percent stake of Eastern Condiments, and initiate a merger with MTR Foods.                                               
 The transaction will see MTR acquire 41.8 percent stake from the Meeran Family, who are the promoters of Eastern. The balance of 26 percent will be picked up from McCormick Spices which holds the stake. After the first leg of acquisition, an application to merge Eastern with MTR will be submitted and the merged company will be owned by Orkla ASA and the two brothers — Firoz and Navas Meeran, with a split stake of 90.1 and 9.99 percent respectively.

Eastern Condiments was founded by Kothamangalam native late ME Meeran in Adimali in 1983. The brand’s name can be traced back to the Eastern Trading Company which Meeran founded in 1968. The company has grown into one of India’s largest spice exporters.Apart from spices, Eastern also sells Sambar podi, Adai Dosai mix, Upma mix, pickles and other ready-to-eat food items. They have also diversified to other unrelated fields like mattress manufacturing. They even dabbled in Education and Wind Energy.The company also acquired actor Mohanlal’s company — Mohanlal’s Taste Buds — in 2007. Three years later, McCormick Spices acquired 26 percent stake in Eastern for Rs 162 crore from a PE Fund and the Meeran Family. The same year, MTR had lost out in the race to McCormick. According to a spokesperson from Avendus Capital, financial advisors to Eastern and McCormick on the transaction, Eastern and MTR combined have “significant synergy potential in terms of product portfolio and geography.” The deal, according to the representative, “is a testament to the strong interest in branded spices from large F and B players. Orkla ASA which is headquartered in Oslo is a major supplier of branded consumer goods in the Nordics, Baltics and a few markets in Central Europe and India

M&M and SsangYong

In April 2010, the company released a statement citing interest of three to four local and foreign companies in acquiring SsangYong Motor Company.The companies were later revealed to be Mahindra & Mahindra, Ruia Group, SM Aluminum, Seoul Investments and French-owned Renault Samsung Motors of South Korea.In August 2010, Mahindra & Mahindra Limited was chosen as the preferred bidder for SsangYong

M&M intended to become global SUV player with this acquisition. However a decade later M&M has written off SsangYong Investment, in the results declared for the quarter ended March 2020. In September 2020 it had informed that over 98% shareholders had approved the company’s decision to transfer, dilution or cessation of controlling stake in its Korean subsidiary after it failed to turn it around even nearly a decade after acquisition. On 21Dec 2020 SsangYong filed for Bankruptcy.

Byju acquisition of  Aakash

Vertical Integration :Nextbillion to buyout Indiabulls Mutual Fund for 175 crore

 In May 2021, Nextbillion Technology Private had entered into a deal with the fund house to buy out the entire stake for 175 crore.

The proposed transaction will mark the entry of Nextbillion Technology (Groww) in asset management space of managing mutual fund schemes. Prior to this transaction, the acquirer did not own and manage any asset management business.

Existing Domain: Registered distributor

Nextbillion Technology is a stockbroker and depository participant. It is also registered with Association of Mutual Funds in India as a mutual funds distributor. It is engaged in providing an online platform named Groww that allows investors to invest in mutual funds and stocks.Indiabulls AMC is a subsidiary of Indiabulls Housing Finance.

Reliance-Disney Deal may face antitrust review

 A merger between Walt Disney's India division and Mukesh Ambani's media enterprise could form a strong entertainment giant in India. However, legal experts suggest the merger might face intense antitrust scrutiny. The merger could require shedding assets. Disney and Reliance, both with significant streaming services and a total of 120 TV channels, are reportedly considering a merger where Ambani's group would probably hold the majority stake.

A merger of Walt Disney's India unit and billionaire Mukesh Ambani's media business would create an entertainment powerhouse in India, but lawyers say any deal would draw intense antitrust scrutiny and assets would likely need to be shed.

Disney and India's Reliance, which each have a major streaming service as well as 120 TV channels between them, are looking at merging into an entity in which Ambani's group would likely have a majority stake, sources said this week.

If a deal was struck, it would be the second to seismically reshape India's TV and streaming landscape as Japan's Sony also plans to merge its India business with India's Zee Entertainment.

One key area of regulatory scrutiny for a Disney-Reliance merger would be their streaming businesses and their power over advertising during cricket - a sport that commands fanatical devotion in India.
Disney Hotstar, India's biggest streaming app with 38 million users, owns the rights for International Cricket Council's matches in India until 2027, while Reliance's growing JioCinema app has the rights for popular cricket league IPL.
The CCI would be worried that the "combined entity, due to its strong market presence in streaming can command their own rates and advertisers will be left without bargaining power," said Vaibhav Choukse, head of competition law at Indian law firm JSA.
While divesting certain channels would be an option to assuage CCI's concerns, the merged entity could also offer commitments to not raise ad rates for a certain period, according to Gautam Shahi of Dua Associates.

The Zee-Sony plan cleared a review by the Competition Commission of India (CCI) last year and could close in the coming weeks. The two companies have said they will divest three of Zee's Hindi TV channels as part of their agreement for regulatory acceptance.

 This deal may get closer scrutiny because of the increased concentration of market power post the Zee-Sony merger. That makes their path to CCI approval more challenging," said Avimukt Dar, founding partner at India's IndusLaw.

Disney declined to comment. Reliance, its broadcast unit Viacom18 and the CCI did not respond to Reuters queries.

"If the market shares of the parties exceed 40-50% in any market, CCI is likely to conduct a detailed investigation," said Choukse.

Reuters Dec 16, 2023