2014 has been a ‘blowout’ year for Global technology M&A so far: According to numbers released by E&Y, the first quarter of 2014 saw $66.6B in disclosed deal values, the highest in 14 years. Marquee deals for the year include Facebook’s acquisition of WhatsApp for $19B, Lenovo spending $2.9B to buy Motorola mobility from Google, Google’s acquisition of Nest for $3.2B, etc. The story for the India software product industry has been different. Despite huge innovation and rising entrepreneurship, most Indian product companies have lacked meaningful exits. According to a recently released study by iSPIRT and Signal Hill, India has seen 159 M&A deals in the timeframe 2010-present, at an overall value of $1.78B. This means that the average deal size is $11M, ~10x lower than that of the Silicon Valley.

1. iSPIRT & Microsoft Thinknext 2014
Trends in Corporate Development: The Emerging Landscape of M&A
Introduction
2014 has been a ‘blowout’ year for Global technology M&A so far: According to numbers released by
E&Y, the first quarter of 2014 saw $66.6B in disclosed deal values, the highest in 14 years. Marquee
deals for the year include Facebook’s acquisition of WhatsApp for $19B, Lenovo spending $2.9B to buy
Motorola mobility from Google, Google’s acquisition of Nest for $3.2B, etc.
The story for the India software product industry has been different. Despite huge innovation and
rising entrepreneurship, most Indian product companies have lacked meaningful exits. According to a
recently released study by iSPIRT and Signal Hill, India has seen 159 M&A deals in the timeframe 2010-
present, at an overall value of $1.78B. This means that the average deal size is $11M, ~10x lower than
that of the Silicon Valley.
Table1: India M&A Deals: 2010-Present1
We see from the charts in Table 1 & 2 that a big chunk of the value in M&A is in B2B software: while 31% of
deals in India were B2B software, this sector represented 38% of the overall deal value. This is in keeping with
the global trends in the tech industry.
1
iSPIRT & Signal Hill Product Industry Monitor report – May 2014

2. Table2: India M&A Deals by Value: 2010-Present2
Table 2 above shows the total inbound M&A deals and the total domestic M&A deals between 2010-
14 across different sectors. We can see that domestic M&A transactions have been mostly in the
Internet/Consumer and E-commerce space, whereas the inbound M&A deals have predominantly been
in the B2B Software area.
In the recent past, we’ve had a few high profile acquisitions in India– Naspers acquired RedBus,
Facebook completed a deal in the mobile tools space with Little Eye labs etc., Sophos acquired
Cyberroam in the security arena, etc. This augurs well for the future for India M&A.
2
ISPIRT & Signal Hill: Product Industry Monitor report – May 2014

3. Key Learnings from the iSPIRT & Microsoft ThinkNext Panel on M&A
iSPIRT and Microsoft hosted a Panel discussion on Trends in Corporate Development: The Emerging
Landscape of M&A at Microsoft ThinkNext in Bangalore in May 2014. This was the first panel of its
kind, with a very interesting setup: 2 VCs, 2 entrepreneurs and 2 Corp Development folks from MNCs.
The event was moderated by Sanat Rao, Partner (M&A) at iSPIRT and the star panelists consisted of
Ashish Gupta (Helion Ventures), Bharti Jacob (Seedfund), Ken Foo (Autodesk), Prashant Gupta
(Microsoft), Sanjay Shah (Invensys Skelta) & Phani Sama (Redbus). We had a marquee audience of VCs
from IDG, Lightspeed, Qualcomm, Inventus etc. who contributed their insights.
Here are some of the key insights that were covered in the panel”:
1. “Discovery” continues to be problem #1 for India software product companies. Most Indian
startups don’t show up on the radar of the big US acquirers, both for business development and
eventual M&A (since business engagement is usually a precursor to M&A). Autodesk first
discovered Qontext (their marquee India acquisition in 2012) through analyst reports in the US,
and understood the team structure and India setup only later in the process.
2. Corp development folks are mostly agnostic to the location of the company. As Ken Foo from
Autodesk put it, “we don’t start our day thinking: today I will acquire an Israeli company … or
an Indian company”. They are looking for a specific product or technology fit & location is
secondary. In case of the Autodesk acquisition of Qontext, the fact that the company was
predominantly based in Hyderabad was relatively irrelevant and only came up once the
technology diligence discussions were ongoing.
3. One interesting insight was the Investment bankers didn’t really seem to play a role during the
discovery process, and all of the participants (buy side, VCs and entrepreneurs) felt that
startups shouldn’t expect a banker to help with initial strategic engagements. Partnerships and
strategic alliances are a critical part of a startup’s day-to-day activity, and are stepping stones to
eventual M&A. iBanks of course do play an important role in helping negotiate the deal and
running the process to a positive conclusion.
4. Acqui-hires (acquisitions with the sole intent of acquiring engineering talent) are extremely hot
right now, due to the shortage of big data, analytics & android/iOS engineers. Obviously, VC
investors are less excited about acquihires & view them as a “last option”. As Ashish put it, a VC
will entertain an acquihire deal only when he believes that scaling the company is no longer
possible, and the company is in danger of running out of cash. On the other hand, Corp
development folks at the MNCs view acquihires as a ‘badge of pedigree’ for the founders!
5. Entrepreneur readiness continues to be a challenge during the M&A process. Indian
entrepreneurs traditionally are techies and don’t spend time building a clear differentiation

4. story or preparing themselves for organizational and financial diligence. iSPIRT does offer an
“M&A hotline” to entrepreneurs where we formally provide advice in the event of an inbound
M&A interest.
6. A new generation of MNCs: Traditionally, MNC companies have established captive R&D
centers in India (e.g.: Intel, Cisco) and then looked at M&A to enter the India market or identify
new technologies. However, the panelists believed that M&A activity in software products will
be driven by a new generation of MNC companies, such as Facebook, Salesforce, Autodesk etc.
who have limited or no presence in India, and are looking to use M&A as a means to acquire
global talent and/or establish a presence in India
7. Future M&A: Based on the “Virtual Mandates” that iSPIRT has received and the open feedback
from the panelists, we believe that future technology M&A is likely to happen in the areas of
Machine Learning & Analytics, SaaS disruptions like HR and Recruiting, Cloud Infrastructure &
Mobility. Companies that have aggregated large groups of customers & partners within India
(small medium businesses, classifieds, consumers for finance etc.) are also interesting for
acquirers.
Next Steps:
 Microsoft Ventures and iSPIRT to conduct workshops to prepare entrepreneurs for M&A -
focusing on due-diligence, valuation and presenting their case to potential acquirers
 As part of its M&A Connect initiative, iSPIRT will continue to deepen engagement with Corp Dev
folks in various organizations to understand mandates and priorities
 iSPIRT will work closely with VCs and Entrepreneurs and act as intermediaries to facilitate exits through
acquisitions