These are all recent M&As, and mark a new trend. Backed by big capital, the new-age startups and unicorns are buying out large, decades old established companies from the old economy. The second similarity between all these deals is: the acquisitions will help the startups and unicorns build a large platform offering end-to-end solutions.
That’s one big reason PharmEasy zeroed in on the listed Thyrocare, even as its preparing for its own IPO. Thyrocare will help PharmEasy build an integrated healthcare platform that will have diagnostics (Thyrocare), telemedicine (its building on its own organically so far), as well as its own core competency of an e-pharmacy.
PharmEasy’s acquisition will also go down in history as that of the first unicorn/startup buying out a listed entity.
Byju’s is India’s most valuable startup commanding a valuation of $16.5bn, and it has been on a shopping spree that includes three-decade-old Akash Institute, famous for preparing students to sit for competitive exams like that of the IITs. Byju’s acquisition of Akash is till date the most expensive by an Indian startup.
Is this the new normal? That’s what ET Now‘s Nayantara Rai asked two veterans of the private markets space: Haresh Chawla, Partner, TrueNorth and Rehan Yar Khan, Managing Partner, Orios Venture.
Haresh Chawla is convinced the consolidation wave will continue, and that 2021 will be the year of M&As. “Startups have got fantastic access to capital thanks also to the era of excessive global liquidity. Simultaneously, Covid has changed customers forever vis-a-vis tech, and no one can deny a digital layer is needed to scale up and utilise offline assets. Startups today want to manage a customer journey end to end.”
Chawla opines mega entities will be created as a result of this consolidation wave, which will also result in cross-pollination of customers.
This M&A wave, however, as seen already is not confined only to startups buying out established businesses. “You have already seen consolidation in pharma with the Tatas and Reliance Industries also buying startups like 1MG and Netmeds. Old legacy companies will also be buying out firms,” said Chawla.
Rehan Yar Khan is one of the earliest investors in PharmEasy and said, “It all comes down to LTV or lifetime value, with companies wanting to engage the end-to-end journey of the customer. They ask themselves what else can be sold to the customer. PharmEasy was already selling medicines, and starting to offer diagnostics makes complete sense.”
Khan made another pertinent point, and that is of loss-making startups having a more visible road to profitability via these acquisitions. “They’re buying profitable companies at the end of the day, and that will help. Markets at the end of the day reward profitability,” he said.
