This article is written by Roshini Pasrija, pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from Lawsikho.com.

Introduction

For a country to be called a developed nation from being called a developing nation is not a one or two day’s thing because when the growth of a country is seen  by many factors from which one of the most important factors is on the basis of economy. For a nation there are many sectors in which development is to be done like services what they are providing, manufacturing units what they have etc. and many others.

As in the market many companies work and international companies also provide their services in different countries as everyone wants to earn profit in the end. Today e commerce is one of the most emerging fields we today can buy anything from any part of the world via the site which provides these kinds of services like Myntra, Amazon, EBay and many more.

For many to enter the market is easy but to survive in the market is difficult when already the market is covered by the big shot companies and new start-up companies may not be able to survive alone in the market. Many companies sometimes get into the situation where either they are not able to cope up with the losses or not able to survive in the market alone or they want to expand their business either in the same field or to enter into different fields for these kinds of situations they use other business strategies to cope up with the situation.

Strategies can include some common ones are merger, acquisition and amalgamation which can be used according to the circumstances.

What is Acquisition?

Acquisition in simple words can be explained as when one company takes or purchases shares or assets of the target company called as acquisition of a company. In acquisition acquirer gets the decision making power as he holds the majority so need not to have permission from other holders in the company. Merger has the similar meaning only a minute difference is there in merger both the companies merge together and form one entity and in case of acquisition both the company the acquirers company and the target company survives and acquirer company becomes the parent company and the target company becomes the subsidiary company. 

There are some benefits as well as some challenges which are faced after acquisition:

Benefits are:

1. It reduces entry barriers by acquiring a company who has a good reputation and is working in a different field then the acquirer company get this opportunity to enter in that particular field without any barrier.
2. Acquisition results in having more market power as now after acquisition the share in the market is increased which will help the company to survive the competition and be marked on the edge of it.
3. Acquisition of a company will result in an increase in resources after which if the acquirer company was planning to expand their business in different lines this will help them in the best way as resources are one of the greatest factors to expand the business and it enables the company to take high risk or to do experiments.
4. Expert advice is accessed as when new startups are acquired by the large companies who are in that particular field from many years they can give expert opinion by which the startups can be used to earn more profit then before.

Challenges are:

1. When acquisition occur its employees who suffer the most as there is clashes of culture because both the company have different ways to work but now when they are acquired their decisions may be clashed and this can create delay of completion of work.
2. Excess of employee’s situation is very common after acquisition because both the companies who are merging have their own employees and for the same position they have more than two employees and it creates problems and sometimes may lead to layoff. 

History of Amazon Company 

Amazon was started in 1994 by Jeff Bezos who had a very simple idea to sell books from manufacturers directly to the customers through the internet. As the time passed Amazon went into a variety of product lines to provide them all over the country through his website. It was a well managed strategy which was different and was successful.

In 2013 Amazon entered in Indian market but they had to take different approaches to work in India because of foreign regulations. Amazon followed different strategies as in India people trust more on going and buying things from the market compared to buying it online so also before approaching customers it was important to explain retailers to use this online platform. So Amazon started an Amazon chai cart which will go to the corners of the city to the small owners and provide them knowledge of this e-commerce world and how this works and also serve chai to them.

Amazon has given a different level and view toward E-commerce and they saw Indian markets and said that Indian markets have the potential and in this time of COVID-19 Amazon doubled their profits by providing their extraordinary services.

History of Uber Eats 

Uber eats got this name in 2015 before when it was started in 2014 was started with a name of UberFresh in San Francisco. Its parent company Uber was founded in 2009. When Uber entered in Indian market in 2017 it started in 41 cities with around 45,000 riders. But later due to the highly competitive market in the food delivery business UberEats had to bear losses. They did fail a bit in India but worked in neighboring countries like Bangladesh and Sri Lanka.

Why Amazon Wants to Acquire Uber Eats?  

There are three main reasons because of which Amazon wants to acquire Uber Eats which are:

1. Firstly amazon wants to enter into the food delivery business this is one of the most important reasons for this idea of acquiring Uber eats. As we know Amazon is providing all kinds of services either it is shopping clothes or grocery as well as now they have their stream which gives benefits to the people who have membership like fast delivery or listen music but now they want to add food delivery to their membership. Amazon knows that they have the capacity to fight in the market with Swiggy and Zomato which are doing great in this field. This is one of the best strategies to enter in the market directly in the middle of the market and expand the business.
2. Secondly the reason to acquire is amazon wants to ramp prime membership services. If amazon acquires UberEats they will integrate this to prime membership and will include food delivery services in this for prime members. Already Amazon is providing many services like streaming, free shipping on amazon, amazon music and this food delivery will add a star to it and it will be perfect. People will prefer one place for all the services by which Amazon will earn huge profit if this acquisition occurs.
3. Third reason is that UberEats is not able to compete in the market due to two strong competitors Swiggy and Zomato. As per reports Swiggy is on 1st position with around 8,00,000 orders per day and Zomato on 2nd with around 6,50.000 orders per day whereas UberEats being new in this market was getting 2,00,000 orders per day there was a huge difference between them. Swiggy and Zomato are the big shots in this food delivery business and are working at huge profits. If Amazon acquires Uber Eats its valuation will be around $300 million and Uber Eats will get the world’s best Ecommerce portal to provide their services.

So these were the main reasons why amazon wanted to acquire Uber Eats but later this acquisition was not possible but then Zomato who was already in the leading position in the food delivery business acquired UberEats by giving 9.99 percent stake to it. This deal made many changes for Uber Eats as well their apps were discontinued. They have stopped their platform of delivering under the name of Uber Eats. The move was made to help Uber Eats from facing losses and again earn profit from the business. After this deal Zomato mentioned that they will together cover around 55 percent market of food delivery. Uber Eats employees will be now working under the name of Zomato and this will increase efficiency of services provided by the Zomato. Uber will continue to be in the market of India in Cab services and compete with their biggest competitor Ola.

Conclusion

Acquisition of Amazon and Uber Eats would have resulted in benefits for both the companies but then it was rejected due to some reason. Uber Eats managed to survive with Zomato and by this Acquisition Zomato have increased their profit and market share. In 2020 Amazon also started food delivery in some parts of Bangalore  after testing it for 6 months they took this step and launched this food delivery service in selected parts of Bangalore and this will be a great challenge Zomato and Swiggy to compete with the world’s best Ecommerce company.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: