What’s Inside The M&A Treasure Trove Of Indian Unicorns

If there is one thing besides the investor dry powder that has fuelled the growth of the world’s third-largest startup economy, it is, without a doubt, consolidations, which have happened in the ecosystem over the last decade or so.

Embarking on their respective merger and acquisition (M&A) journeys, Indian startups have not only entered new markets but also fostered new technologies and widened their access to newer and bigger TAMs (total addressable markets). In this race to grow at a break-neck speed, bolstered by hand-holding, joint ventures, or even acquiring and merging with peers and rivals, Indian unicorns, too, seem to have aced the M&A game.

Consider this: Between 2014 and 2023, the Indian startup ecosystem witnessed 1.2K acquisitions by Indian startups. Of these, 110 unicorns led over 400-plus acquisitions, according to Inc42’s latest report on ‘Decoding India’s Unicorn Club’.

Further, of the total 110 unicorns in India, as of August 10, 2023, ecommerce unicorns have spearheaded the maximum acquisitions. In ecommerce, rollup unicorns together acquired more than 40 firms. In edtech too, BYJU’S and Unacademy acquired 30 companies – accounting for more than half of total M&As in the sector.

Cure.Fit, BYJU’S Lead The M&A Graph

Interestingly, 33% of the total acquisitions in the country’s startup space have been led by a handful of unicorns, with Cure.Fit, a fitness and health platform, at the helm.

Cure.Fit was launched in 2016, following the acquisition of two Bengaluru-based fitness studios, Cult and Tribe. Today, the unicorn has acquired a total of 28 startups.

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Other prominent names leading the M&A charts are Mensa Brands with 21 acquisitions, Flipkart with 19 acquisitions, BYJU’S at 18, and Zomato and GlobalBees at 16 acquisitions each.

In terms of individual (disclosed) deal value, BYJU’S is an undisputed winner. Four of its biggest acquisitions include Aakash Educational Services Limited (at $1 Bn), Great Learning (at $600 Mn), Epic (at $500 Mn), and WhiteHat Jr (at $400 Mn).

The Saga Of Shaky Acquisitions

While acquisitions are certainly a great strategy for growth and scale, it can also create issues for a company. Overvaluation, incompatible cultures, failure to realise synergies, regulatory challenges as well as unrealistic expectations in terms of growth can put the acquirer company at risk.

For instance, BYJU’S acquisition spree has backfired by multiple degrees, and the company has been at a crossroads for the last two years. The edtech is already contemplating shutting down Whitehat Jr, while Aakash Educational Services Limited (AESL) has been cornered in a legal battle.

Similarly, Snapdeal acquired fintech startup Freecharge in 2015 for an estimated $400 Mn. However, as the talks regarding its merger with Flipkart failed to take off, the company sold the digital payment app to Axis Bank for mere $60 Mn in July 2017.

Another unicorn Unacademy, too, has experienced a series of downturns since it embarked on its acquisition journey in 2020. The Bengaluru-based company acquired more than ten startups, including Rheo TV, PrepLadder, Mastree, Spayee, CodeChef, SwifLearn, Kreatryx, and TapChief, and launched an array of products to serve the edtech space.

However, its journey is now fraught with challenges, be it exiting the K-12 segment, layoffs, or even unwinding its US operations, subjecting the company to some of the most turbulent times since its inception in 2015.

What’s Next?

With the ongoing funding winter and markets undergoing corrections, the overall M&A trend is expected to accelerate further in the Indian startup ecosystem.

With examples like Zomato turning profitable, it is anticipated that more unicorns will emerge in the black, triggered by a wave of M&A deals. Looking at the profitable ones, many other unicorns may find themselves on the acquisition route to strengthen their tech, teams, and product line or even expand their footprints into untapped geographies.

However, according to the managing partner at Orios Venture Partners, Anup Jain, most M&As will take place between Series A and C stages, where funding has slowed down, and many will choose to retain as much value as possible via the consolidation route.

He further predicts that startups operating in high-cash burn sectors such as ecommerce, edtech, content and media, healthtech, B2C lending, and fintech payments will see more M&A deals than others.

With the number of unicorns expected to cross the 280 mark in the next five years, there will be no dearth of startups taking the consolidation route. Amid this, various funds that have already started to explore secondary asset purchase opportunities at lower valuations will continue to strengthen their play. This will likely trigger investors to look for more merger and acquisition deals for their portfolio companies, thereby paving the way for more unicorns in the county.

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Update – August 23, 2023: The table on biggest acquisitions has been updated with the logo for Leisure Group – a European vacation rental operator (that has been acquired by Oyo), which was earlier misrepresented with that of Leisure Hotels Group.