Essay: Analysis of Acquisitions in E-commerce Sector – A Study of Myntra and Flip kart

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  • Subject area(s): Business essays
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  • Published on: February 27, 2016
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  • Analysis of Acquisitions in E-commerce Sector - A Study of Myntra and Flip kart
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Abstract
The acquisition of Myntra (India’s largest fashion e-tailer) by Flip kart (India’s biggest e-tail company) brought together two of the biggest e-tailers in India. Made possible by common investors, the acquisition would enable Myntra to leverage on Flip kart’s infrastructure, while allowing Flip kart to strengthen its portfolio of product offering. This consolidation is seen as a response to taking on Amazon which has made big plans for Indian market. The aim of the study here is to find out the reasons for the acquisition of the two companies, their strengths in the marketplace, pre and post valuations and revenues, implications for investors and the relative market position of each company.
Keywords: E-tailers, acquisition, leverage, share exchange ratio, earnings per share
Introduction
Acquisitions bring the ultimate change in business . Mergers and acquisitions are either very challenging or chaotic . According to Oxford, the expression ‘the term “Acquisition” refers to the acquisition of assets by one company from another company.Both companies may be surviving in the acquisition process. The acquired company will be assimilated in business and the acquiring company will continue to remain in the business and thus, the acquired company continues to exist even after the acqusition.
Multiple prospects develop for any enterprise due to transfer of technology. The prospects would lead to access of new markets that were previously not availaible due to cost, regulation, or indirect barriers, it also gives an oppurtunity the to beat resources such as capital, knowledge and labor.Foreign competitors pose challneges for domestic markets, in terms global sourcing, moving production offshore or gaining economies of scale by expanding into new markets.
Flipkart also known as Amazon Of India acquires online fashion retailor Myntra in an estimated 2000 crore deal.Flipkart wants to be the leader in every segment and fashion is the future for them this acqusistion will help them to become leaders in the fashion segement.
The research paper aims to identify the reasons behind flipkart’s acqusition of Myntra and it analysis the market position of Flipkart before and after acqusition of Myntra.
Objectives of the research
• To identify the reasons for acquisition of myntra by flipkart.
• To understand market position of flipkart and myntra before and after acquisition.
• To examine the share exchange ratio of the deal.
• To analyse the valuation of flipkart and myntra post acquisition.
 
Literature review
Farhat Fatima(2014) in her research paper From merger to an acquisition has discussed about strategy of Flipkart to invest 600 crores in fashion segment and its philosphy behind find giant acquisition and examines major challenges faced by Indian consumers while shopping online .
Priti Nigam, Keyurkumar M Nayak. Parimal H. Vyas(2015) in their research paper E- Commerce Challenges: A Case Study of Flipkart. com Versus Amazon. in have discussed about three aspects E-tailing, E-Commerce, Online Shopping. They have critically examined corporate and business level strategies of two big e-tailers Flipkart and Amazon. A comparative study has been done about marketing strategies followed at Flipkart and Myntra .
Swapnil V. Mishra, Shamkant N. Kotkar(2015) in their study on A Study on Current Status of E-Commerce in India: A Comparative Analysis of Flipkart and Amazon have discussed growth of ecommerce industry in India and how flipkart has contributed to it .
Rajeshwari Malik (2014) discussed about how Flipkart and Myntra would retain their separate identities and brands as of now, management structure for both the organizations would remain the same and how people are holding Myntra stock options will now hold the same in Flipkart.
Priyanka , Khushboo Sagar and Richa Verma(2014) have researched ,analyzed the challenges faced by Indian e-commerce sector. They have also covered recent acquisition in India that is about how Flipkart buys out Myntra for $300 Million. Flipkart is a leader in selling multiple product categories online and Myntra is India’s leading fashion retailer with strong brand recall. A comparison has been made between Flipkart and Myntra on the basis of valuation, registered users , products, revenues ,shipments etc.
Research Methodology
The research is Descriptive and qualititaive in nature.Secondary Data has been collected to conduct the research.
Secondary Sources – research journals, infomercials, magazines, case studies and websites. Secondary data has played a vital role in this report. A good amount of data has been collected from various published articles and case studies. Internet has been the other important source for data collection, particularly the company’s website. Certain books have also been referred to know more about the acquisitions.

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