The much-talked about Flipkart-Myntra deal for months now seems to have reached the final stages. However, it is yet to be decided whether it will be an acquisition or a partnership. With three common investors – Accel Partners (early stage investor), Tiger Global (hedge fund) and Sofina (Belgium based family office), both the companies are in discussion and all feasible options are being explored.
For the past few months, Accel and Tiger have been keen on a merger between the two ecommerce giants. However, Myntra chose money in February when it came to choosing between a possible merger with Flipkart and investment from Wipro. Following the investment, Flipkart’s Bansal said that a merger with Flipkart was not feasible as the companies operated on different business models.
While Bansal agreed that it would be beneficial for both parties to consider ways of working together as it would enable them to take on competitors like Amazon more effectively, according to reports, Myntra’s founders are not keen on an outright acquisition. They would prefer a financial investment or similar wherein they would still be able to operate as a separate entity.
Contrary to the wishes of Myntra’s founders, other investors of Myntra have been leaning towards Accel’s and Tiger’s preference of a merger as they feel it is more to important to grow rather than just focusing on selling.
A merger will benefit Flipkart and Myntra in terms of reduction in operational expenses and increase in resources. As of now, there are two possibilities:
- Business merger –In 2012, Flipkart did a business merger/acquisition with electronics e-tailer Letsbuy following which Letsbuy ceased to exist. Myntra’s founders do not prefer this option possibly because of Letsbuy’s case. They have already made a mark of their own so far as a fashion destination and unless there is an unavoidable financial reason, there is no sense in losing out on this position.
- Financial merger – Amazon acquired Zappos in 2009 and it now runs as a separate entity.
Benefit for Indian online seller in the event of Flipkart-Myntra merger
A business or financial merger, sellers will benefit if Flipkart and Myntra will join together. Combined resources present more opportunities for associated sellers in terms of wider customer reach and more listing options, thus enabling more sales.