In today’s globalized world India has emerged as an engine of global economic growth where the average GDP run rate is 7.2 per cent. This is encouraging creation and implementation of more and more policies focusing on further growth. The government’s intent to rejuvenate the Indian economy has positively affected the business environment. Indian companies are now getting more aggressive in acquisition scenario as they can see the government’s vision. This is completely visible in the market because of some major takeovers that have happened in the recent past.
The problem arises with MSME (Micro, Small and Medium Enterprises) segment where it is difficult to exit or expand i.e. selling a business or buying a business since it is difficult to market them and help them reach the right audience and also because of the high charges of investment banking companies.
In the desire to create an ecosystem for the MSME where such issues can be addressed and resolved platforms like IndiaBizForSale.com, mergernetwork.com etc. were created. Indiabizforsale.com started in 2013 and is an initiative to provide MSME the support and direction they require to make their challenging and difficult choice. Any individual interested in the MSME sector can register on the portal under the best-suited category and help themselves with the economical and reliable services provided.
Since inception the portal has been getting an overwhelming response but 2015 has proven to be ground breaking in many ways than one. The number of business sellers and buyers registered have doubled and quadrupled respectively, while brokers who act as transaction advisor have seen 30 per cent increase. On the whole there were above 1700 businesses listed for buying and selling all over India covering most of the states, this was, a massive rise of 240 per cent compared to businesses listed in 2014. The listed businesses consist of all types of companies MSME to large sized companies.
The top 4 sectors of both buyer and seller listings are Manufacturing, IT, Hotel/Food (Hospitality) and Pharmaceuticals which contributes 65 per cent of total listings on the platform. With the increase in the seller listings for these industries more and more business buyers in the same sectors have emerged. The demand for these businesses could easily be viewed in the market.
The government’s launch of the ambitious ‘Make in India’ initiative was to place India on the world map as a manufacturing hub and give global recognition to the Indian companies and in turn the whole economy. This turned out to be very beneficial for scores of SMEs that form the backbone of manufacturing sector of the country. It has also eased in the way for creating and operating new manufacturing units in electrical, automobile, pharmaceuticals and petroleum industries. Also government’s ‘Digital India’ campaign has catered to buying and investing in businesses in different IT segments like e-commerce and web hosting and support which in turn has increased the demand for respective applications and software resulting in tremendous growth of the industry.
As per the trends seen on the portal the bulk of the buyer’s and seller’s requirements are under 5 crores which by definition comprise of the MSME sector. The year 2015 also saw a gradual shift in investment coming from medium and large sized companies wanting to increase their market share and hence the rise in investors wanting to invest more than 5 crores.
The platform has created good path to exit, invest in and buy businesses. The various reasons that we have come across for selling a company are varying from personal reasons, to looking for equity partners and from profit making to non-core businesses where they cannot devote their time and resources. Different types of sellers have evolved to sell their stake in the business by creating joint venture to expand and upscale so they can reduce their debts as well as boost to the next level.
Around 50 per cent of the buyer’s motive is completely transparent, that is, to acquire the business in the same industry and to increase their market share while there are 20 per cent of buyers who want to diversify to other industries. There also are many well-experienced professionals who use their domain knowledge and acquire a company, that is, turning to seasoned entrepreneurs and businesses instead of creating a new company from scratch. Inclinations are also evolving in many companies of forming strategic partnerships by acquiring stake and create joint ventures. Investors have also started infusing cash in few niche businesses by repaying or reducing their debt and becoming stakeholder in it.