There is more private equity and venture capital funds flowing into Indian product start ups than in Israel but young product companies in Israel are being acquired at six times the value seen for acquisitions of Indian companies, a report by the Indian Software Products Industry Roundtable (iSPIRT) has revealed.
The ‘India Technology Product M&A Industry Monitor Report’ put out by iSPIRT and Signal Hill a consultancy firm here on Friday has reported a growing trend in the mergers and acquisition of young product companies in India but has stated that it lags behind countries like Israel or the US where thriving start up scenarios exist.
VC/PEs investment in Israel from 2010-13 was half ($1.5B) that of India ($3B), but the total technology product merger and acquisition deal values in Israel during this period was more than 6 times the M&A transaction value seen in India, mainly driven by a much higher ($100M versus $11M) average M&A transaction size in Israel,” the iSPIRT report has stated.
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There have been 159 merger and acquisition deals involving Indian technology product companies since 2010 “with a total estimated transaction value of $ 1.78 billion,” the report said. The majority of deals involve domestic companies although the acquisitions from abroad have been higher value ones averaging nearly $ 23.3 million per deal compared to the $ 6 million for domestic deals.
The iSPIRT report said “the B2B software segment accounted for 56 per cent of all inbound M&A transactions with foreign players (mostly US and European) acquiring Indian software companies” while E-commerce and the Internet segment dominated domestic deals “with Naspers’ acquisition of Redbus being the exception to the rule”.
“For the Indian product startup eco-system to flourish it is critical to to drive up the level of technology product M&As”, said Sanat Rao, who heads iSPIRT’s initiative to help Indian software product companies find possible buyers from foreign shores.
The “Indian technology product M&A deal values are still low in comparison to Israel. Key reasons for this include: Israel has a more evolved M&A eco-system with many serial entrepreneurs who are better at spotting technology gaps, building a tech product company and preparing for M&A,” says serial entrepreneur and iSPIRT founder member Sharad Sharma. Indian technology product companies also “face a discovery problem amongst the global technology acquirers,” Sharma said.