News: Flipkart acquisition bid rejected by Snapdeal but talks to continue

#MergersAndAcquisitions

Flipkart acquisition bid rejected by Snapdeal but talks to continue

After the due diligence which lasted two weeks, Flipkart's subsequent offer of $700-800 million to acquire Snapdeal has been rejected by the latter.
Flipkart acquisition bid rejected by Snapdeal but talks to continue

The Flipkart-Snapdeal merger seems to have been put on hold for the time being as the proposal of $700-800 million buyout by Flipkart has been rejected by Jasper Infotech which owns Snapdeal.

As People Matters had previously reported that Flipkart was conducting due diligence of Snapdeal, and made the offer shortly afterward, but it is rumored that the initial bid was much higher. According to this media report, Snapdeal feels that the offer undervalues the business as the due diligence reflected no major issues.

This puts Snapdeal in an extremely uncertain situation and as it has already been reported that Snapdeal might also layoff people as plan B if this merger does not work out. It has also previously laid off its employees, considering the weakening trust of the investors in the startup and their hesitation to reinvest in the company. Both the companies have seen major exits in the last couple of weeks, and especially for Snapdeal, it has been both voluntary and nonvoluntary. According to media reports, the layoff number could extend from 600-1000 people.

While if Flipkart does acquire Snapdeal, then as previously reported employees might get benefited as the founders would invest half of their payout in a proposed scheme which would cover all of the Snapdeal employees.

Though, since the deal is being pushed by SoftBank, which owns shares in both the startups, the talks are speculated to still continue. Previously, SoftBank had got over a major hurdle when it eventually managed to get Snapdeal founders and its early investors Nexus and Kalaari onboard.

Apparently, it is the minority investors in Snapdeal which are the cause of the ongoing delay in the merger, as they are hoping to create consensus and oppose special payouts to certain stakeholders. It is believed that the certain stakeholders which would be given a special payout to the founders of Snapdeal and its early investors Nexus Venture Capital and Kalaari Capital.

If the merger comes through, it would consolidate the e-commerce industry further and would enable Flipkart, which has acquired eBay’s Indian business to take on Amazon. The possibility which was further strengthened when Microsoft, Tencent, and eBay invested in the Indian e-commerce company. For now, it is completely dependent when would the two major stakeholders in both the companies who are SoftBank Group and Tiger Management Global for both Snapdeal and Flipkart respectively.

Topics: #MergersAndAcquisitions, C-Suite, Employee Relations

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