Five major reasons could be assigned to the demise of the Flipkart-Snapdeal deal
Something did not go right on the weekend of July 29/30. There was an important meeting scheduled between Snapdeal-Flipkart deal for Monday, July 31, which was canceled. This sounded the death knell of the merger deal between the two e-commerce giants. Earlier on July 26, the board of Jasper, the holding company of Snapdeal, had given a go-ahead to continue negotiations for a Snapdeal sale to Flipkart, based on an enhanced buyout offer of $850 million by Flipkart two weeks earlier.
Five major reasons could be assigned to the demise of the deal.
1. Kunal Bahl and Rohit Bansal – the two founders were always opposed to the deal. In the days and weeks preceding the calling off of the deal, Kunal had managed to persuade some of the important board members on his vision of a Taobao and Rakuten like market place, which he called Snapdeal 2.0. Patterned on Alibaba’s Taobao and eBay, Kunal apparently convinced his Board that Snapdeal 2.0 would be an asset-light, local market place which would be much easier for sellers to sell on. The company would shed significant weight, go down from the existing 1,200 employees to perhaps 300 employees in the new avatar. The new Snapdeal would not any longer be into the competitive one-day-two-day delivery system, but would focus on operational efficiencies of its sellers, focusing on cost efficiencies. Basically, what Kunal must have told his board was that the acquisition of eBay by Flipkart had left a void in the ‘market-place’ space in India where the e-commerce entity merely acts as the mall, allowing sellers to open their own outlets, and therefore, playing the role of a destination and real estate owner only. Alibaba in China has perfected this model through Taobao. Bahl sold Snapdeal 2.0 as the Taobao of India.
2. Some of Snapdeal’s minority shareholders, including Azim Premji had protested and opposed the proposed pay outs under the Flipkart deal to Nexus Venture Partners, Kalaari Capital and to the Snapdeal founders, Kunal and Rohit. Snapdeal co-founders Kunal Bahl and Rohit Bansal were likely to receive $30 million in cash each from SoftBank after their exit from the company. Kalaari and Nexus were to receive $60 million from SoftBank, in addition to equity in Flipkart. This special treatment to select shareholders, orchestrated by SoftBank to buy their peace, irked other shareholders….