How a failed M&A deal with Bounce forced vehicle rental marketplace, RentOnGo, to shut shop

RentOnGo, a Bengaluru-based online vehicle rental marketplace, has shut shop after a merger with bike rental start-up, Bounce, did not go through.

Nikhil Chhabra, Co-Founder, RentOnGo, in a post on Medium.com has blamed the management of Bounce for going silent on the deal, after having signed the term sheet and completing the due diligence.

“Ten months of excruciating pain that I, personally as the founder, and every shareholder of RentOnGo has had to go through. During this period every Call/WhatsApp message to Bounce was either met with ignorance or a string of common excuses — “we are raising more money, so will need more time”, “board is not approving the deal and taking time” and so on. Whenever we challenged the very basis of having given a term sheet and going through entire DD, all we got was the threat of calling off the deal,” Chhabra wrote.

Bengaluru-based Wickedride Adventure Services Pvt. Ltd owns Bounce, an online motorbike and scooter rental firm, and has top investors, including Sequoia Capital India and Accel Partners. Bounce was earlier known as Metro Bikes.

RentOnGo was founded in 2012 by Chhabra and Vikash Jalan. The company lists products provided by vendors, including bikes and scooters. But the company was burning cash and had to continuously raise funds to sustain in the market. “We felt it would be wise to look at consolidation and spoke to interested players in the mobility space. This is when, during the start of Oct 2018, after a couple of months of negotiations for an M&A, we got a term sheet from Bounce (aka Wicked Ride),” Chhabra said.

The due diligence got underway after a month of that. By the end of December 2018, everything was cleared by the due diligence team. That is is when the real ordeal began for RentOnGo, Chhabra says.

“And no surprise that during the due diligence, the confidential data of customers was shared. Till date, we have not received an email/ call from Bounce to share any reasons/ logic why they cannot go ahead with this deal,” Chhabra said in the post.

Commenting on post by Chhabra, Vivekananda Hallekere, CEO and Co-founder of Bounce said, "To set the record straight, Bounce had clearly communicated to RentOnGo that the acquisition cannot go forward. This was due to decisions RentOnGo took before approaching Bounce and during the process of Due Diligence (DD). Bounce realised that the risk far outweighed any value that was there in RentOnGo."

According to Hallekere, when RentOnGo approached him through TVS last year, Chhabra had already decided to shut down their business. The initial discussion, which led to the term sheet, was to give TVS equity in Bounce, equivalent to its monetary exposure in RentOnGo. "This later turned into a discussion to acquire them completely. However, during the DD we realised that this was not a viable business option for Bounce," Hallekere said in a statement.

Hallekere said that even before the DD was complete, RentOnGo had decided to shut down their business. Therefore, Bounce wanted to run the operations, fund the cost and brand it Bounce. To which RentOnGo disagreed. Therefore it did not make sense from a brand or operations point of view.

"During DD, Bounce realised that RentOnGo was renting vehicles without required commercial insurance and license to rent vehicles. The bikes were rented without insurance, which meant unlimited damages in case of any untowardly incident. This was at loggerheads with Bounce's business model," he added.

Even when the DD was underway, RentOnGo informed all its customers that the company was shutting down. This took away the main reason for acquiring their business. "RentOnGo also had lost most of its employee base due to the premature announcement of the shut-down. This made sure that there was pretty much nothing left of value for Bounce to acquire," Hallekere said.

"Bounce had no role to play in how things turned out for RentOnGo. They had decided to shut their business even before they approached us and took some decisions while we were in discussion, this made it impossible for Bounce to acquire their business. Bounce communicated the company's views to RentOnGo, however, they refused to acknowledge or accept that their decisions did not make business sense to Bounce," Hallekere said.

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