Startup ecosystem sees a consolidation wave, 28 M&A deals done in eight months this year
Over a dozen buyouts of young startups have been sealed in the past four months — roughly double the number of deals struck last year — pointing to a wave of consolidation among new-age companies in the entrepreneurial ecosystem.
eTailing India Thought Corner
Merger and acquisition on rise in startup community
In 2015, Indian entrepreneurs received more than $9 billion of funding. With the advent 2016, funding slowed down and start-ups saw a hard spell of wooing investors. In the midst of it, consolidations seemed one of the best possible options for many startups. The trend is likely to intensify this year as many sectors see the trimming of flab.
Reasons for consolidations:
- Acquisition of technological capabilities from smaller startups
- Insufficient capital to scale up business
- Companies seek opportunity to acquire top talent for management and domain knowledge.
- Too many companies from same space
- Keenness amongst Investors’ for merger of portfolio of same space companies to facilitate cost synergy.
For now, funding prospects are available to most of the early stage startups which showcase innovative and disruptive technology models in fields such as e-commerce, retail, healthcare, education and financial services. Apart from it, niche segments such as Artificial Intelligence, Internet of Things and food-aggregators are most popular amongst investors.
From government’s end, it has arranged cushion on tax exemptions for investments beyond the fair market value meant to support development of startups.
The emergence of a new consolidation wave perhaps is good sign for growth in the startup ecosystem.