.svg)
Get in Touch
We would love to hear from you!
Recent posts
M&A Transactions in Global E-Commerce Sector: Q1-2017
Kreston Menon
The global M&A transactions in the first quarter of 2017 in the e-commerce sector, has crossed $1 billion with top e-commerce and brick & mortar players such as Amazon, Alibaba and Walmart acquiring regional and niche e-commerce startups.
Description of Deal Buyer Target Value (US$ million)
Amazon buys Dubai-based Souq.Com Amazon.com Souq.Com Not disclosed
Walmart buys fashion retailer ModCloth Walmart ModCloth Not disclosed
Alibaba, SAIF invests in Paytm E-Commerce Alibaba Paytm E-Commerce 200
Ebates acquires ShopStyle from PopSugar Ebates PopSugar Not disclosed
Walmart acquires Moosejaw Walmart Moosejaw 51
Coty acquires stake in Younique Coty Younique 600
Walmart acquires online retailer ShoeBuy Jet.com Shoebuy.com 70
Table 1: e-commerce acquisitions in Q1-2017
In the first quarter of 2017, Walmart continued to battle against its e-commerce rival Amazon through a series of acquisitions including Shoe Buy, Moose jaw and Mod Cloth. The retail giant reported a solid finish to fiscal year 2017, with total revenues of about $497 billion, and an increase of 3.1%, compared to fiscal year 2016. Notably, the individual acquisitions of Walmart in Q1-2017 are much lower than the $3.3 billion it paid to acquire Jet.com in 2016.
Walmart kicked off the year 2017 with the acquisition of an online shoe retailer ShoeBuy.com, throughWalmart’s subsidiary Jet.com, for $70 million from IAC, thereby strengthening its online footwear business. ShoeBuyretails footwear, clothing and accessories for women, men and kids and carries more than 800 brands. The acquisition of ShoeBuy underlines Walmart’s continued push against Amazon, the owner of online shoe store Zappos, which was acquired by Amazon in the year 2009 for about $850 million. While ShoeBuy isn’t nearly as large as Zappos (considering the revenue), it still gives Wal-Mart a foot in the door to more robust clothing sales.
Apparel is the largest online sales category in the U.S. While Wal-Mart sells a good amount of clothing in its brick-and-mortar stores, it doesn’t crack the Amazon’s online apparel retail.Thus, in order to penetrate more into the vast apparel market, further acquisitionswere made by Wal-Mart. In Feb-2017, Wal-Mart acquired Michigan-based online outdoor clothing and gear retailer Moosejaw for $51 million in cash. The acquisition of Moosejaw has improved Wal-Mart’s competitive standing in the U.S. e-commerce space against its rivals.Teaming with Moosejaw is expected to allow Walmart to sell a complete assortment of apparel, including brands like Patagonia, The North Face, Marmot, and others.
In order to accomplish its goal of catching up with Amazon,Walmart has acquired the assets and operations of online apparel retailer ModCloth for an undisclosed sum, in Mar-2017. ModCloth offers clothing and accessory items, including independent designers, national brands and ModCloth-designed private label apparel. It’s very clear that the massive retailer’s M&A tactics have been very much focused on helping it beef up its e-commerce sales by expanding its online product portfolio and customer base.
Moving on to the fashion and beauty space, the New York-based beauty products maker Coty has acquired 60% stake in privately held online cosmetics retailer Younique for approximately $600 million in cash. Younique and Coty expect to combine Younique’s high growth e-commerce platform with Coty’s extensive manufacturing and supply chain capabilities to accelerate the product offering and geographical expansion of Younique. Younique actively makes use of the social media to sell its cosmetics through individuals, known as ‘presenters’.Younique’s sibling founders, Derek Maxfield and Melanie Huscroft, retain a 40% stake in the online cosmetics retailer, which they will continue to run as a separate business within Coty’s consumer beauty division. The acquisition of Younique by Coty was after it not doing any acquisitions since 2015, when Coty had paid $12.5 billion to acquire Proctor & Gamble’s specialty beauty business.
India’s fast growing e-commerce space, which has been witnessing battle between Flipkart and Amazon, has also seen Alibaba taking more interest to have its presence felt, in Q1-2017. The Chinese e-commerce major along with investment firm SAIF Partners has invested about $200 million in India-based Paytm’s online marketplace. Alibaba’s Singapore unit invested $177 million for about 36% stake and SAIF invested $23 million for 4.66% stake in Paytm E-Commerce.
Also Read: M&A Transaction in Retail and Consumer Sector(Between 1st-july to 30th-Sep,2016)
U.S.-based e-commerce leader Amazon which has been in India for past five years trying to displace India-based e-commerce unicorn Flipkart, has reached an agreement to buy Dubai-based internet retailer Souq.com, in Mar-2017. The transaction details were not disclosed by Amazon, though Reuters and other news agencies expect the deal value to be in the range of $600 to $750 million, much lower than the $1 billion valuation that Souq had in earlier rounds of funding in which it raised $275million from investors including Standard Chartered Bank. Souq.com sells consumer electronics, fashion, household items and other goods, claims to be the largest e-commerce site in the GCC. For Amazon, acquiring Souq.com provides a ready platform to expand quickly in the region with large, young and tech-savvy population.
In Feb-2017, Ebates which connects shoppers and retailers through digital content and provides cash back shopping, has acquired ShopStyle from PopSugar. ShopStyle is a fashion discovery and search platform that partners with brands, retailers, stylists and top bloggers to bring exclusive content and unique style perspectives. Ebates strengthens its position in product discovery space and enhances expertise in fashion vertical through the acquisition.
The competition among the major e-commerce players seems to be neck-to-neck in the Q1-2017. While Walmart tried to catch up with rival Amazon, Amazon’s fight against Flipkart was intensified in India. However, Chinese e-commerce heavyweight Alibaba was getting down having its presence felt in the promising e-commerce space India. Coty also strived to become a global industry leader by being aclear challenger in the fashion and beauty domain. We can expect more interesting acquisitions by established brick & mortar retail in the e-commerce space in the next three quarters of 2017.
Read More
VAT – How Prepared is Your Business?
Kreston Menon
VAT is about to mark the beginning of a new era for the Gulf Cooperation Council (GCC) countries by bringing in a fundamental shift in the countries revenue collection. As the GCC member states are to adopt Value Added Tax (VAT) on 1 January 2018, companies are on a limited timeline to prepare for the first phase of VAT implementation. In this point of time, regional businesses are scrambling to determine exactly what they can do now to prepare for VAT. In the countdown to VAT implementation, companies should consider taking some simple steps now to keep abreast of their obligations, which are discussed over here.
VAT is not just a finance project! So, plan ahead…
VAT in UAE affects almost all the transactions and touches every aspect of the organization. It’ll possibly affect IT systems, finance, human resources, legal teams and even inter-organization transactions. So, prepare a detailed project plan and secure the necessary internal and external resources. Also, ensure the stakeholders in the business are well-informed on the same.
Carry out impact assessment
This is a key step to set the foundation for the VAT implementation. Businesses need to carry out an impact assessment to understand VAT and its commercial effects, prioritize issues and prepare in the best possible way for the implementation. Impact assessment would include assessing changes required to the ERP systems, product pricing, ongoing and long term contracts, supply chain, working capital etc.
Keep an eye on existing contracts and terms of business
Perform due diligence on your existing contracts. Continuous contracts which may be ongoing even after 1 January 2018 and also company’s standard long term contracts need to be analyzed if you need to consider making an amendment to any provisions in these contracts, and/or to any standard terms of your business.
Consider M&A / JV transactions
Due consideration should be given as to monitor if any relevant agreements now include specific warranties, obligations, and indemnities, in connection with VAT.
Read More
UNCTAD Ranked the UAE as the 12th Top Destination for FDIs
Kreston Menon
Recently, The World Investment Report 2017 by United Nations’ Conference on Trade and Development (UNCTAD) shows that the UAE is the 12th most earned foreign direct investment (FDI) with an impressive inflow of $9 billion in 2016. The report also reveals that other countries, such as Bahrain, Lebanon and Saudi Arabia surpassed the rest in the region. Unfortunately, it’s a whole different story for the investment market globally as its FDI is expected to decrease by 2% or $1.75 trillion, according to UNCTAD.
Furthermore, the Minister of Economy, Sultan Bin Saeed Al Mansouri, predicts that FDIs over the coming five years will surge following the launch of mega projects for renewal energy and retail industries. He also noted that growing FDIs to the UAE advanced from $109 billion by the end of 2015, to $117.9 billion by the end of 2016. With which an impressive 8.2% came from the escalating investments in transformational, aviation and tourism industries. “The country is developing well thought-out strategies in line with the National Agenda of the UAE Vision 2021 by aligning efforts and ensuring synergies across all sectors at the federal and local levels in alignment with the directives of our wise leadership,” the minister added.
Given such a significant data, the UAE ranked the second top recipient across west Asia with a 32.3% of total FDIs coming to the region last year 2016. This is a good news for the business Setup UAE and foreign investors as we can only expect to see further growth for the coming years.
Read More
Auditors In UAE : 3 Factors for Considering
Kreston Menon
Deciding which auditor to hire can be a bit tedious as it involves your company’s financial stability. Ideally, the relationship between a company and the auditor should be long and beneficial for both parties. Since the stakes are considerably high in choosing the right auditors from the best audit firms in UAE, we have shared the key factors that a company needs to consider in order to choose the ideal auditor that will match its goals.
Transparent Communication
The key to any long term relationship between businesses and its auditor is to build a strong foundation of trust. The auditing firm should be transparent in the process it employs and the quality control procedures it follows. Businesses should know that the work is accurate and complete, thus an open communication is likewise essential. Audit firms that practice openness is ideal as companies can expect that even the smallest inconsistency in the audit is communicated immediately before it escalates into a larger issue. Moreover, an enviable auditing firm should ensure that the company understood the auditing process and freely answer all their questions about it.
Industry Experience
A business’ financial statement should be handled by experts with experience similar to the organization’s field or industry. Companies should do a thorough research about the background experience of the auditors in UAE. Don’t just rely on their website’s portfolio and client’s page; it’s helpful to also look into their review pages on Google and other company review platforms. Another way is to ask them for a list of references and call at least five references. Furthermore, assess on how they keep up with the evolving trend in the accounting world. This way, companies will have an idea how the auditor can prepare and face the future changes that may occur. Likewise, the auditing firm employs a meticulous review of the client’s credentials before pursuing the deal. This way, the firm maintains their standards in taking only the credible clients.
Audit Fee internal-audit-services
There’s an old saying “you get what you pay for. ’’ Basically, the quality of services will conform on the cost. It’s a little doubtful if the auditing fee is lower than usual. This will lead a company to question whether the auditor is amateur and inexperienced, thus the low fee. Essentially, the fee shouldn’t matter much but still considerable to the process. Since both parties should benefit from each other, it’s expected that the audit fee is competitive and rational.
The financial statement establishes the financial condition of the company. It supports the efforts of the business development strategy of the company, whether their plan to risk investing in another venture is profitable or not. Auditing firms are expected to determine the downfall and effects of these efforts by doing a methodical audit process. Small discrepancies in the audit could cause a lot for the business, thus hiring the ideal auditor that fits your company needs is vital.
Read More
A tailored approach to risk management processes and architecture
Kreston Menon
Risk management processes are a section of general business procedures. Procedures are utilized to oversee and screen the regularly changing risk situations.
The risk management process architecture is the outline of procedures, including their segments of sources of inputs, handling, and results. This design inventories and depicts risk management processes, each procedure’s segments and interactions, and how they work together and additionally with other processes in the enterprises.
Even though risk management processes can differ by organizations, there are some basic factors that every organization must have.
They are:
Identification of risks
This is the gathering of procedures focused at making a standard, target approach for distinguishing risk by knowing situations and surroundings. It is about the interior business context, the environment outside that business works in, and your technique as to where the business is heading. This likewise includes checking significant legal and regulatory environments in relating purviews to distinguish changes that could affect the business and its goals.
Evaluation of risks
Once an association recognizes risk, then it can distinguish what can be done to support or hinder the goals. An association needs to recognize the potential outcomes of results to what can affect it accomplishing destinations. This must include heat maps to incorporate a variety of risk evaluations and techniques (e.g., analyzing scenario, Bayesian modeling and bow-tie risk analysis).
Treating risks
After the potential conceivable outcomes are comprehended, the association needs to choose what to do. It should know what will be the best course to accomplish goals while limiting loss or harm. The objective is to optimize value and return while keeping risk inside within acceptable levels of risk tolerance.
Monitoring risks
This stage incorporates the variety of procedures to ceaselessly screen risks in the association. These exercises are the ones commonly done inside the association to screen and evaluate risks on a continuous basis.
Risk communications and attestations
Continuous procedures to deal with the communications and attestations with owners of risk all through the risk management cycle. These are done at intervals or when certain risk conditions are activated.
Successful risk management processes will offer:
Holistic consciousness of risk
This implies there is characterized risk categorization across the enterprise that structures and lists chance with regards to business and relegates accountability.
Establishment of risk culture
It must be imparted over the business to build up a risk administration culture. These are kept current, inspected, and evaluated all the time.
Decision making
This implies the business has what it needs to settle on business choices. Risk procedure is coordinated with business strategy.
Multidimensional risk strategizing
The organization needs risk examination, correlation, and situation investigation. Different subjective and quantitative risk analyzes strategies must be set up and the organization needs a comprehension of loss to impart into analysis.
Read More
Countdown to VAT: What is its Impact on Your Business?
Kreston Menon
Value Added Tax (VAT) – A tax on transaction; the concept is quite simple in theory, yet from a business perspective, the changes that the tax entails are often huge. It is a fact that the introduction of VAT system in the UAE will not just affect the end-consumers, but will have a deep impact on businesses as well. It won’t be too long to the introduction of VAT in UAE; as of Jan-2018, the UAE will introduce VAT to 5%. So in this context, let us help you get certain important concerns on VAT cleared.
What is the impact of VAT on your business – positive or negative?
VAT, in an ideal scenario, is a mechanism in which the subject supplying goods or services, can deduct the tax paid on purchases from the tax charged to buyers. Hence, the difference between the tax applied to sales and that paid on purchases will be paid to the Government. Even though this is the actual case, there may be a context wherein there is loss in the margin of business due to VAT, if sales and purchase processes are not designed with required controls. Besides, this will certainly increase the pricing of the products to the end-customer. So, the whole business model needs to be carefully reassessed.
What are the business functions that will be impacted by VAT?
The impact of VAT can be felt across several business functions. As most of us might think, VAT implementation is not just an accounting task, but also a business strategy implications for CEO’s as the outcomes will be across pricing, IT systems, supply chain, processes, policies and contracts, and even HR.
How to implement VAT changes effectively in your organization?
In order to implement VAT changes effectively across your organization, it is quite essential that you should understand the new legislation and obligations quite well, and should review the daily activities of the company without fail. Most companies will have to make few changes to their core operations, financial management, and, probably their human resources. Particularly, organizations should:
- Determine which all areas of the firm will be affected by the introduction of VAT
- Process forms, templates and documents, in order to adapt them to the new rules
- Partnering with an efficient IT Team to effectively implement changes in the IT System
- Update the accounting section and adapt the financial records
- Make sure that the incoming and outgoing invoices are compatible with the new regulations
- Adequately train HR department so that everyone understands the changes and the new responsibilities, and prepare accordingly to these aspects within the company
- Adjust the contracts with the regulations
- Review the tax provisions that are already in place
Read More
