Smergers, an online matchmaking platform for SMEs

There are around 4,000 listed companies in India currently if one takes into account all the large companies along with the small and medium enterprises (SMEs) that have gone public over the years. These companies are always in the limelight due to various developments, such as fund raising and also mergers and acquisitions.

There is, however, a much larger pool of companies in the country that mostly remain under the radar but are equally important for the overall economic development and progress of the country. It's the vast number of SMEs, spread over the entire geography of the country.

According to government statistics, there are more than 5 million registered micro, small & medium enterprises (MSMEs) in the country with almost all states and union territories contributing to this huge number.
 
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These companies also need capital to grow but mostly have to be dependent on either banks or some opaque funding route. While loans from banks could be time consuming with a lot of paperwork and collateral, other avenues charge a high rate of interest and are much riskier in nature.

Vishal Devanath identified this lacuna and started his firm Smergers -- a play on the words SME and mergers -- in 2013, and today the platform boasts of more than 70,000 pre-screened businesses along with investors from over 170 countries.

"We are the matchmakers for businesses that are looking to either expand, buy or sell," says Devanath while highlighting the fact that last year the platform facilitated 80,000 introductions between entities that were looking at acquiring, merging or selling businesses.

Smergers is a platform that brings together investors -- both individuals and corporates -- and SMEs that are in need of funding or even open to an outright sale.

According to Devanath, there are currently around 17,000 businesses on the platform on the sell side that are looking at an investment or even a complete exit, while the buy side comprises of around 54,000 entities.

"If we look at the buy side entities, while individuals account for the largest chunk, we even have corporates, funds and a few banks as well. Around 25 per cent of the individuals on the buy side are foreign investors. In absolute terms, their number would be around 14,000," he says.

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Interestingly, the pandemic just heightened the traction in the mergers and acquisition (M&A) space in the SME segment. While around 80,000 introductions took place on the platform in 2020, the current year has already seen around 63,000 introductions till date.

"The pandemic was only a temporary glitch. Overall, there was a positive impact as entities on the buy side had cash and they did not want to keep it in the bank but invest. There is a lot of interest from the buying side," says Devanath.

Incidentally, the ratio between buy and sell side was around 1:2 till April last year, which meant that for every one sell side entity, there were two buy side parties. Post the pandemic, the ratio changed to 1:3 as the number of buyers rose more than the quantum of sellers.

Meanwhile, Smergers has three main sources of revenue, which includes subscription, services and success fees post a deal closure.

An entity that registers on the platform gets two introductions for free, but if they need more then they have to pay, says Devanath, adding that around 30 per cent of all the profiles on the platform are paid ones.

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