Wednesday, 20 December 2017

Paytm Acquires Nearbuy and Little, to Merge both - Expect A Busy 2018 On The M & A Front

Paytm on Wednesday announced the acquisition of Nearbuy and Little, two deals platforms that focus on local restaurants as well as commercial establishments. In a statement, Paytm said it arranged a merger of the two well-funded start-ups and made a “strategic” investment in the resultant entity for a majority stake. Sequoia Capital India, a large investor in Nearbuy (formerly Groupon India), continues to be a shareholder in the merged entity. Paytm did not say whether Sequoia sold a part of its investment in Nearbuy to Paytm Nearbuy, which was founded as SoSasta, was acquired by NASDAQ-listed Groupon Inc. in 2011.The company was later renamed as Groupon India, in 2013.In 2015, Sequoia Capital India and the current chief executive officer (CEO) Ankur Warikoo bought a majority stake from the US-based parent of the firm and named it Nearbuy.Little app (Little Internet Pvt. Ltd), on the other hand, was launched in 2015 with initial backing from Paytm, which wanted to test the waters in the hyperlocal deals business.The app started with a $50 million investment from Paytm, SAIF Partners and Tiger Global Management (SAIF is also a large minority shareholder in Paytm).

After a somewhat choppy 2017, many experts are calling for a busy 2018 in the M&A space. The Predictions and Reports suggests that the pace of M&A activity will increase in 2018, based in large part on “a combination of gradual acceleration in global economic growth, low inflation in advanced and emerging economies, buoyant asset markets and low-interest rates that continue to bolster the M&A markets.”  While there are concerns that could impact the potential increase in deal flow (such as a rise in economic protectionism or a global equity sell-off) the prevailing view is that the positive conditions for M&A activity will continue to rule the day and drive increasing deal making.

One of  M and A Experts says “The State of the Deal-M&A Trends 2018” report takes a similar view. The report, based on a survey of business executives, notes that a significant majority of respondents expect M&A deal flow to increase over the next 12 months, while deal size is expected to increase as well.  The report cites acquiring technology, expanding customer base in existing markets and expanding/diversifying products and services as the leading drivers for M&A deals.  Among other positive factors, the report notes that cash reserves are up significantly at potential acquirers, and that the primary intended use of that cash is for acquisitions.

Family-owned businesses should see an uptick in M&A interest as we move into 2018.
Buyers are always on the watch for well-run businesses with quality earnings and customer bases.  Family-owned businesses that are looking to grow should see an opportunity to acquire other businesses.  Those businesses that want to take advantage of a favourable market should start to take steps now to prepare, by working with management and advisors to get the business “in shape” for a transaction.  Several upcoming posts on this blog will discuss specific items that come up in almost every deal and steps business owners can take to prepare for a sale, such as dealing with financial statements, contracts management and HR/ERISA issues.

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