Bid To Win & The Will To Win - Two Contrasting Examples From The Real World

In M&A, bidding with the intention of winning is important, as we explored in last week’s post.

Today, let’s explore this theme in some depth.

For M&A (or for that matter, any business initiative) to succeed, there is a need for decisiveness in decision making, followed up with the intent to see things through. This is not just about bidding aggressively on attractive M&A candidates. This is much bigger than any tactical choices being made during M&A execution. This is about decisiveness in strategy which then percolates down to execution. And to simplify this esoterism, let’s take the example of how two companies approached a certain M&A theme and the outcomes so far.

Consider Zomato and Flipkart - both of them had tried their hand at quick commerce /hyperlocal delivery initially via organic initiatives but neither tasted much success. Flipkart launched Nearby¹ in Oct 2015, which was shut down after ~5 months². Flipkart Quick was their next in house attempt, which commenced operations in Jun 2020³ just as India was coming out of the peak covid lockdowns and as several other hyperlocal delivery businesses also came up. Flipkart Quick was shut down in Nov 2022⁴. Two organic forays not working, did not dent their interest in the space. As the news suggests, Flipkart did try going inorganic, with Dunzo in Feb 2024⁵ and with Zepto in Mar/Apr 2024⁶. Neither inorganic attempts seem to have worked either. And now, Flipkart might just try its luck with another organic foray, slated for launch in Jul 2024⁷

Zomato had launched a hyperlocal grocery delivery in Apr 2020⁸ to cater to the demand during the covid lockdown (like Flipkart’s Quick) and this was discontinued in Sep 2021⁹. Interestingly, just before the discontinuance, in Aug 2021, Zomato had picked up a 9% stake in Grofers (now Blinkit). And in Jun 2022¹⁰, Zomato acquired Grofers.

Consider the approaches & outcomes for both of these companies. Both went organic first, but somewhere along the way both companies saw merit in doing M&A in the space. Zomato tried and succeeded. And per Goldman Sachs, the Blinkit business today is worth $13bn, while Zomato is worth around ~$11bn¹¹. Say what you will of equity research reports & their price targets, but Zomato has clearly done very well with its $626mn acquisition of Grofers/Blinkit. Flipkart, on the other hand, is still waiting for a win. Or dare we say, a decisive approach.

Tech businesses have largely warmed up to the need to keep track of emerging trends that can impact or aid their businesses and they do a fairly good job of identifying these trends. But, being able to decisively choose how to play these trends, is where more can be done and where the c-suite & strategy functions, have to step up. There is the usual buy-vs-build conflict that corporate buyers have to navigate. For large businesses, there are further filters of scale and focus when they think of expanding into new businesses. And not to speak of the challenges in winning in M&A, especially in sectors that are in vogue or the whole rigmarole that comes after the M&A. Add scrutiny and media glare into the mix and you have the stage set for strategic paralysis or poor & tentative decisions.

Once a trend is seen as important to participate in, business leadership have to quickly get decisive about they intend to play the trend. Yes, experiments should be done to try out approaches, but the focus should be on eliminating what does not work and decisively moving away from those. After all, there is immense time value in getting to the right or at least a better decision sooner than not.

In my view, if Flipkart wants to get big in the quick commerce space, M&A might be the better choice. This is not to say that their organic forays can never bear fruit. But, timely and right M&A will make the path much easier. Leadership needs to be decisive. Once that is in place, they will discover how things like acquiring a majority stake or minority or deal valuation & structuring become footnotes to a grander picture. And the beauty of M&A is that deals can be revisited.

Sources -

1. https://techcrunch.com/2020/07/28/indias-flipkart-launch-hyperlocal-delivery-service-flipkart-quick/

2. https://www.livemint.com/Companies/HtDM8KSQDcIktzXurKAnTI/Flipkart-shuts-grocery-delivery-app-Nearby.html

3. https://www.livemint.com/companies/news/flipkart-launches-90-minute-delivery-service-11595919001189.html

4. https://inc42.com/features/flipkart-quick-commerce-do-over/

5. https://inc42.com/buzz/flipkart-in-talks-to-acquire-cash-strapped-dunzo/

6. https://economictimes.indiatimes.com/tech/startups/flipkarts-majority-stake-talks-with-zepto-fall-through/articleshow/109411464.cms?from=mdr

7. https://thearcweb.com/article/zepto-flipkart-walmart-acquisition-quick-commerce-zaJV2ed0iA21IvJG

8. https://lbb.in/mumbai/order-groceries-online-from-zomato/

9. https://www.livemint.com/companies/news/zomato-ends-grocery-delivery-service-from-today-here-s-why-11631839478047.html

10. https://yourstory.com/2022/06/timeline-grofers-evolved-zomato-subsidiary

11. https://economictimes.indiatimes.com/tech/tech-bytes/blinkit-contributes-more-to-zomatos-market-cap-than-its-food-delivery-biz-goldman-sachs/articleshow/109617343.cms?from=mdr