Largest M&A Deal- Walmart Takes over Flipkart

Walmart Inc is an American multinational retail company, the largest in the world by revenue and strives to grow more by giving a cut-throat competition to its peer and one of the biggest rival company is Amazon. Due to its expertise in retail market and a strong supply chain management and a commitment to deliver the quality at the lowest possible price Walmart acts as a silent killer for all the small retailers; and to grow further primarily to enter in the online retail alike the Amazon in Indian market it has invoked various possible way and came out with the acquisition of Flipkart, which is having the largest share of Indian retail market around 31.9% chased by Amazon at 31.1%.

One of the largest deal, probably in the world is the Buyout of Flipkart by Walmart. the deal stuck at the investment of US $ 16 Billion out of which 12.5% i.e. US $ 2 billion is for fresh equity capital and the balance was payment to the existing investor of the FLIPKART PVT LTD (the company) leading to the change of controlling stake of Flipkart to Walmart which is 77%. The deal enhances the valuation of Flipkart to around $21 billion proving itself as a windfall gain to the Flipkart shareholders however in contrast the share of Walmart has been fallen by 4.2% just after the deal got finalized. Walmart’s choice in India is starkly different. While Flipkart has absorbed billions of dollars of investor money to rapidly grow its business, its main bait has been deep discounts. Walmart's investment would give Flipkart not just additional funds to fight Amazon, but also arm it with a formidable ally with extensive experience in retailing, logistics and supply chain management. Walmart, with huge experience in a first-world economy, will revolutionize Indian retail with low prices and a vast variety of consumer goods.

It is interesting to note that the rival which is now being faced by Amazon is its own creation as the founder of Flipkart Sachin Bansal and Binny Bansal is the two interns of Amazon itself which it failed to keep them. The two IITians established Flipkart with a capital INR 4 lakh and with further infusion of investments by various investor now the company is standing in front of Amazon as the competitor, however, Amazon might not get affected by the Indian Flipkart until the Flipkart was backed with the Walmart which was phenomenal, and a threat for other e-commerce retailers and a strong contender in the competition.

NITI Aayog Vice Chairman Rajiv Kumar said “It will have a very positive impact. The deal is as per the country's FDI norm," he further added, that Walmart is a global leader and will help small businesses in India to procure goods at a cheaper rate. The deal will also have a positive impact on FDI investments into the country. However, besides having several benefits of the deal, it inherits some difficulties along with same as, just like “every coin has two faces”.

The positive impacts may be held as:

a) Increase in employment opportunity

b) Research & Development

c) Economic growth

d) Availability of goods at a low price.

The cons which shall be taken care of:

a) Shut down the brick and mortar business

b) Data security may be compromised

c) A threat of protest from traders

Walmart did not see a role for two co-founders on the board. The group chairman of Flipkart, Sachin Bansal will sell his remaining 5.5% stake for about $1 billion (Rs 6,700 crore) and exit the company. Tiger Global’s sold 17% in the company and left with remaining 5% stake in Flipkart, which is worth another $1 billion, based on the online retailer’s estimated worth of about $20 billion following the Walmart deal. SoftBank, which had become the largest investor in Flipkart, Sold its entire stake of more than 20% in the online retailer. Accel the first company in 2008 to invest in Flipkart still holds some share in the company.

The deal has unlocked the booming Indian e-commerce market for the world’s largest offline retailer and Flipkart will be given more arsenal to go up against rival in Indian market i.e. Amazon, both are now locked in an intense battle for leadership in the Indian market and have pumped in billions of $ towards marketing and setting up infrastructure in the country. It will surely be likely to generate a lot of action in India in the coming years, both in the e-commerce market as well as in the tax world.

(The figures have been extracted from various sources, must be vetted by the user)



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