The race was on because Jabong was in the late stages of talks with Flipkart arch-rival Snapdeal.
Flipkart moved quickly to steal Jabong from Snapdeal, who desperately wanted to gain market share in the fashion ecommerce segment.
“Generally, a deal of this size takes three to six months from due diligence to closure. Wrapping it up in 72 hours was a challenge,” comments Vinay Joy, Associate partner at Khaitan & Co.
In the case of Flipkart and Jabong, Vinay and his team understood the risks and proceeded with documentation on all levels. It’s possible that the Jabong team was already in the process to provide the due diligence documents to other parties interested in buying it.
An agreement can be worked upon and signed within three days but a legal and financial due diligence of a company already mixed in controversies is not possible within that time frame.
Jabong murky history
Jabong’s prime backer was Rocket Internet. The stake was later sold to Global Fashion Group, in which the latter owns a stake, along with lead investor Kinnevik AB. Rocket Internet was unhappy with the fact that GoJavas, a logistics company incubated inside Jabong and now a separate company valued more than Jabong, has no shareholding in it. This eventually led to an audit at Jabong.
We have a high bar when it comes to governance, regulations and compliance. Unless a company can clear that bar, we have issues. – Kunal Bahl, CEO of Snapdeal.
Out of all the mergers this year, the acquisition of Jabong is probably the most controversial, and far from being smooth. Flipkart’s lawyer will be conducting post-due diligence even after the deal is inked.
A version of this appeared in Tech In Asia on July 28. Read the full version here.