Solving The Flipkart-Snapdeal Mystery

We all love reading stories of startups who have made it big. When they command billion dollar valuations they spark our imagination and young entrepreneurs want to follow in the footsteps of these uber-successful founders, who serve as role models for them. This is why the Snapdeal-Flipkart deal has attracted so much attention.

Sometimes the deal is on, and then the next day it’s off! This is a mystery for most people. Because no one is really sure what’s happening, and we can’t understand why such experienced deal makers are flipping and flopping.

After all, these are extremely smart guys have helped to build a unicorn from scratch. Their funders have very deep pockets and their ticket sizes are routinely in the millions of dollars. Obviously they must be brilliant – after all, how can you become so rich without being very clever? In that case, why do they keep on changing their mind at the last minute? Why are they being so fickle? What’s happening behind the scenes?

This is the stuff mysteries are made of, and when you combine mystery with money; it’s definitely going to make headline news! Everyone has their own pet theory, but we’ll never know the truth until someone goes to court – or many years go by and the insiders start sharing stuff.

However, most will not, because they are bound by confidentiality clauses. Also, no one wants to expose the skeletons in someone else’s cupboard because there’s a risk that their own skeleton will come tumbling out! This is why most high-flying dealmakers keep quiet – and this just adds to the conundrum.

You’ll hear a lot of rumours in private circles but you don’t know how much credibility to grant to any of them – they get distorted very quickly, thanks to the game of Chinese Whispers we all play.

So how does one make sense of this? What are ordinary mortals like you and I meant to learn from all the Flipkart Snapdeal shenanigans?

If you look at the Flipkart Snapdeal merger from a purely rational perspective, they make very little business sense. How does merging two companies that are both doing badly help either of them? However, deals at this level are driven by financial engineering, and there is often a kingmaker behind the scenes, who is using these companies as pawns in a game which he sees playing out in his head.

The truth is that a lot of them are irrational, because they are made by people who have king-sized egos, and want to protect these, no matter what the financial cost.

If it works, we will laud him for his foresight and brilliance – for his ability to see where the world was headed, and to lead the charge. However, if it flops, we are happy to be armchair critics and discuss how short-sighted these dealmakers are.

[This post by Dr. Aniruddha Malpani first appeared on LinkedIn and has been reproduced with permission.]

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