SMERGERS is a Bangalore-based company in the online financial services market that was founded by Vishal Devanath and Krishna Bhardwaj in February 2013. It is a technology platform that connects businesses and investors across the globe.
Vishal completed his MBA from IIM Bangalore post which he worked with Avendus Capital and was directly involved in managing mergers and acquisition deals in the technology sector. This is when he realized the need for such services for the SMEs in India. “There are 48 million SMEs in India and they usually cannot afford fees that typically exist for the bigger players,” says Vishal. This led Vishal to start SMERGERS along with his friend Krishna.
SMERGERS is like a marketplace of SMEs where investors can browse for companies they may want to invest in or bigger companies which may want to acquire them. And for the SMEs, the platform is a way to connect with investors. Fundamentally, SMERGERS wants to be for SMEs, what AngelList is for startups. Founded by Naval Ravikant in 2010, AngelList has become the go-to place for investors to keep an eye on upcoming technology startups and a must-be place for every serious technology startup.
The model for SMERGERS is similar but there are intricate differences in how the startup and SME worlds operate. By SMEs, we're referring to more of the brick and mortar ventures like a restaurant, a pharmaceutical outfit, a solutions company, etc. Vishal started off by making calls to small businesses which used to offer their business for sale or advertise for investment in newspapers, websites such as Quikr, Click.in, etc. “These advertisements seemed quite out of place, shown along with small ticket items like bikes, cars and used refrigerators for sale. When I spoke to the business owners, it was clear that an online marketplace focused on such strategic transactions and providing necessary services to close the transaction would be ideal to solve this problem,” says Vishal.
On the other side, Vishal got referrals from friends he knew in the investment banking space. “Typically when a smaller company approaches these investment banks, they would send them to me instead of losing the relationship by turning them away. Soon we came in touch with several CAs, CSs, real estate consultants who had clients looking for takeover, funding etc who wanted to leverage our platform,” says Vishal. As they started making good introductions to businesses registered with them, promoters started recommending the platform to others.
“The first cheque I got was for Rs.1000/- from a small scale unit in Chennai to create a verified business profile on SMERGERS (which was not even fully developed at that time). It was a cold call based on an advertisement and I spoke to the promoter on phone,” says Vishal. This Rs.1000 made Vishal happier than the lakhs he got as bonus at the previous company he was working in. Armed with this validation it was time to go all out.
SMERGERS has managed to register 430 SMEs and 366 investors till date. The number of transactions which are completed have not been revealed as it is still very early days. M&A transactions typically take more than six to seven months to close and among the SMEs registered with SMERGERS, the average transaction size is around a few crores.
The biggest challenge for SMERGERS would be to bring this business online. “While many business owners understand the advantages of technology, they still want to interact with us in a traditional manner. They would like to visit our office (which by no means looks like an investment bank, but more like a startup-style garage), make payments through cheques instead of online payments, sign hard copy agreements, etc.” says Vishal. Secondly, since the plan is to build this platform which can be leveraged at scale by users across the world, they also need to have strong mechanisms to make sure that any transaction which gets initiated on SMERGERS is completed on the platform itself. “To tackle the same, we are building ways in which clients use our ancillary services and are more secure with us than taking the deal outside of SMERGERS,” says Vishal.
There are more than 48 million SMEs in India and SMERGER is working with a vision to have every SME registered with them for their capital needs. “We aspire to make SMERGERS a leader in the Indian SME market first, and then scale operations to a global level,” says Vishal.