With 230 mergers and acquisitions (M&A) deals in 2022 so far, India’s tech startup segment continues to witness consolidation. With about a month left, the number of transactions is slightly behind the 242 reported in 2021. But experts believe the fundraising winter could cause more smaller startups to sell out to larger peers. Many of them have opted to cut jobs and revamp their cost structures to improve cash runway, but many startups are gearing up for next year’s down rounds.
Investors active in the startup space are likely to see more consolidation in 2023 as small to medium-sized startups may find it difficult to raise capital on favorable terms. It shows that there is a Merak Ventures partner Manu Rikhye says a funding shortfall in 2022 will see his M&A activity grow even more next year as both founders and investors may rush to protect existing valuations. said it would be
“Investors and founders already expect 2023 to be an even tougher year and may look proactively for deals, as the longer they wait, the greater the decline in value.” added Rikhye.
Smaller startups, especially in the consumer space, ended up being acquired by large unicorns such as Byju’s, Vedantu, CRED and Zomato. Big players like Tatas, Jio, Reliance, TransUnion, Asian Paints and Aditya Birla have also taken advantage of the predicament to acquire weaker players.
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Most of these acquisitions offer a meaningful exit for venture capital (VC) and private equity investors. According to startup tracking platform Tracxn, angel investment firm LetsVenture had around eight exits in CY2022, while VC firm Sequoia Capital had seven and angel fund Indian Angel Network had seven more. Large firms such as Jio and Aditya Birla Capital had six and four exits, respectively, according to Tracxn data.
Between 2018 and 2020, the number of M&A deals fell below 164, and exceeded 200 in 2021 and 2022. In CY2022, the grocery delivery app Blinkit received his highest acquisition price of $568 million paid by Zomato.
The second most valuable acquisition of the year was TransUnion’s acquisition of Bengaluru-based compliance management platform Fintellix for $515 million, while the third most valuable acquisition was US-based Thrasio. It reportedly paid $507 million to acquire the Gurugram-based consumer durables. Brand lifetime online.
A severe financing winter, combined with multiple global factors such as rising inflation, high interest rates and the war between Russia and Ukraine, has led Indian tech start-ups to cut billions of dollars in spending and cut thousands of jobs. I was forced to hide.
Tracxn co-founder and CEO Neha Singh said that despite a year of stagnant fundraising, investor exits are expected to grow significantly in CY2022 compared to previous years, largely due to a surge in M&A and domestic IPOs. said to have improved to “Last year, most of the M&A deals were done because there was plenty of cash among the big unicorns and tech companies, but this year is different. , was a survival tactic, especially for small businesses that were acquired due to ongoing funding shortfalls,” Singh added.
The ongoing negotiations between startups over potential M&A are as active as ever, but some have not materialized, putting pressure on both the investors and founders involved. increase. Earlier this year, PayU closed his $4.7 billion deal to acquire payments firm BillDesk. This has also triggered a ripple effect, with other smaller acquisition plans being reviewed, said an investor in the space.
“Investors have already adapted to the new lower valuation times, but sellers have not yet come to terms with that reality. It could continue, said an M&A expert at a large private bank.
An early-stage investor who requested anonymity added that when big deals like PayU-BillDesk go awry, the founders’ buyout appetite is sapped.
“Now that a regulated IPO opportunity opens up, it would look like a better exit option than an M&A filled with uncertainty,” the investor added.
Vikram Chachra, founding partner of fintech investor 8i Ventures, said startups on the market to be sold in the near future will “make sure to include clauses that make it very expensive for the buyer to walk away last.” I think it will be like this.” Minutes, less vocal about it, more likely to close the deal. ”