The Inside Story of Snapdeal-Flipkart merger breakdown

Both Kunal and Rohit put together have only 6.5% of stake at Snapdeal. In spite of getting two back to back offers from Flipkart of USD 800 million and USD 950 million, plus having Softbank go ahead for the deal, they managed to prevent this merger from happening.

Was this a masterminded plan to stay in control of their company despite of investors and employees wanting it other ways?

How did they use their veto power in construing this great deal breaker?

Here is a detailed insight on how Snapdeal was always cultured to stay as a personal startup and never meant for sharing or in building a great ecommerce story.

• The string of pearls opportunity:

Bahl has always thought that he is destined for great things. One company was not enough for him. He wanted to be an ecosystem creator - sort of an Indian Jack Ma. He called it his favorite String of Pearls theory, which like most other things that he has done, is a concept directly ripped off. So much for original thinking.

In order to seize this opportunity, Snapdeal eroded the money chest of billions in buying out multiple companies and either closing them down or selling them for peanuts - Shopo.in, Doozton.com,

Wishpicker.com, Smartprix.com, luxury fashion products discovery site, Exclusively.in., GoJavas,

Unicommerce, RupeePower, FreeCharge, Reduce Data, Den-TV etc. All these acquisitions failed or were either shut down, or scrapped like FreeCharge. If you buy something for $400 million, burn

additional $100 Mn on it over 2 years, call it a crown jewel and then sell it off for $50 million, it is a scrap sale.

• The gravy train opportunity:

Internal sources say that some of these acquisitions were conducted with the motive of personal gain.

For example, Unicommerce was a company part owned Bahl & Bansal and as luck would have it, was acquired by Snapdeal. The $400 Mn freecharge acquistion (at that time the largest ever) seems to have never been put under any kind of scrutiny. One of the co-founders over-ruled an internal due diligence report to buy GoJavas. Much has been written about this acquisition.

• The sharing opportunity:

In the history of Snapdeal, the only people who have made real money, and boat loads of it, are Bahl& Bansal. Old timers and senior executives have had negligible share of any stock sales. Seasoned executives like Head of M&A Abhishek Kumar, HR Head Saurabh Nigam, Head Technology Amitabh Misra, Head Marketing Sandeep K, SVP Alliances Tony Navin, ex CFO Aakash Moondhra, Vijay Ajmera etc - a number of whom were with Snapdeal from the early years, quit in disgust at the obstinacy and unwillingness of the co-founders to share wealth. More are following with nothing but broken promises and ESOPs with zero value.

• The theater opportunity:

In February, in an email to employees, Bahl and Bansal, pledged to take a 100% salary cut with immediate effect. The truth is they were making 50 crores each prior to that - perhaps the highest paid founders in the start-up world around. So much for employee first, conserving cash and cutting costs to turn around the fortunes of the firm.

• And an opportunity for Snapdeal Board:

It is difficult to understand why the board has not protected the shareholders interests. How has it allowed the cash burning, people churning founders who have a track record of destroying value and flushing a billion dollars in the drain not been fired by the board of Snapdeal? How has it allowed the co-founders leeway for such degree of mismanagement?

A very senior ex-employee speaking on the condition of anonymity said "The equation is very simple. On one hand you have a bulk of employees getting assured employment & board approved $30 Mn bonus.

They become a part of a group rated as one of the best places to work. The investors recover some of their investments. The plan B option benefits only 2 people."

A current employee said, "Plan B does not make any business sense. No one believes it. It is amazing that neither the investors, nor the board has seen it fit to discuss it with a wider group of employees or understand its feasibility. It is doomed from the start and will erode investor wealth even further."

An observer from the VC /PE circles commented "Kunal Bahl led ecosystem is peculiar as it made money only for 2 people and surprisingly the board has left them in charge inspite of all the sins of omission and commission. It has left a bad taste in the mouth of investors and employees. I am sure this is not what the government wanted as an example of Start Up India!"

Another employee said "Many members of my team have resigned and the ones who are left were staying hoping for a positive outcome of the merger. This was promised by Kunal in his email to employees. With this drama going on and on, it is increasingly obvious that Kunal was lying yet again and did not let the deal happen. My team and I are fed up and very soon there will be no one left.