india going global.indd - The IIPM Think Tank

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PANORAMA The year gone by has seen heavy business activity in the mergers and acquisition segment, a few of which has already been mentioned above. Consulting fi rms made huge money out of this, irrespective of the fact that it created value or synergies for its client. Some acquisitions saw destruction of shareholder value but most of them were successful. It is not easy to gauge the synergy created between the acquirer and the target based on the fi nancial performance or balance sheet values. The synergies created are seen only after three years of the takeover process where the target fi rm settles down in the culture of the acquirer. And Now: The trends in market suggest that outbound investments from India will mainly be in oil, pharmaceutical, automotives and service sector, while the inflow of investments are expected in emerging sectors such as retail, telecommunication, infrastructure and real estate as the state opens up for the foreign investments. Inbound investments in infrastructure, real estate, retail, and logistics have started emerging. India’s M&A environment is vibrant due to positive regulatory mechanisms, globally accepted business processes, and a robust and optimistic investment climate. In the recent policy announcement, the State has given capital subsidy of 25 percent on investments for setting up semiconductor and nano-technology manufacturing units. This will probably further fuel cross-border M&A deals in the electronics industry. According to Investment bankers, Merger & Acquisition (M & A) deals in India will cross $100 billion this year, which is double last year’s level and quadruple of 2005. (Source: High Tide of Mergers and Acquisitions in India – ARC Advisory group - By Sharada Prahladrao). This mark is bound to be surpassed by a considerable margin; given the fact that the total equity deals struck by Indian companies have crossed 50 billion USD in fi rst five months of 2007. In the same timeframe last year the equity deals stood at 13.5 billion USD (as per ICICI bank’s private research division in their Global Investment Outlook report). If we look at the biggest M and A deal of last year, it has to be merger of AT&T and BellSouth (valued at around $73 Billion) where as the topmost takeover/ merger deal by an Indian company was by the world’s biggest steelmaker, Mittal when he achieved success in buying all the shares of its top competitor, Arcelor of 10 Need the Dough July-October - 2007 It is not easy to gauge the synergy created between the acquirer and the target based on the financial performance Luxembourg (at $33 Billion). This year Tata Steel kept the consolidation wave high in the steel sector with the acquisition of Anglo Dutch fi rm- Corus- in a $10 Billion deal to form the fifth largest steel-producing entity in the world (with Arcelor-Mittal leading the race by far). In recent times, there have been speculations flying high about the Indian market being ripe for another mega Merger deal. This has brought out reports of a proposed takeover of Capgemini (the European outsourcing giant) by Indian top software outsourcing company Infosys. To bring out the disparity in the size and extent of each of these companies, we can see that even though Capgemini has a turnover of $10.35 billion compared to Infy’s $3.1 billion, the strength that Infy carries is in its Market capitalization which lies at $27 billion (while Capgemini has capitalization of $10.4 billion). Such a high (almost thrice) capitalization, regardless of company turnover expanse, is what contributes to the high cash reserves in the company and hence the need to expand the operations. In spite of these reports being mere speculations, it has had a positive impact on the share prices of Capgemini, which in turn just signifies how a proposed takeover/acquisition can benefit the acquiree through value creation. In 2001, a tiny step that India Inc. took in terms of outbound deals worth USD 0.7 billion has eventually swollen to a staggering USD 15 billion by 2006. In fact during January-May 2007, the total M&A deals were worth USD 47.37 billion, of which the cross border deals were worth USD 28.19 billion. Though currently, in relative terms India is still a baby in terms of the total global M&A market (which has been around USD 2.7 trillion, for the same period), but then the manner things are proceeding, in no time it is going to be a formidable player in the global scene. References: - High Tide of Mergers and Acquisitions in India – ARC Advisory group - By Sharada Prahladrao - India Inc embarks on an merger a acquisition spree - The Free Press Journal — December 29, 2004 - Infosys’ Cap Gemini plan: Is it a saga of identity crisis -Krissy- June 30, 2007 (http://www.bpotiger.com/2007/06/infosys_cap_gemini_plan_is_ it.html) - Contemporary and future issues in Indian banking – by V Leeladhar (http://www.bis.org/review/r050321g.pdf)
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Page 1: IIPM Planman Hyderabad Campus New D
Page 4 and 5: M A K E W E A L T H W H I L E O T H
Page 6 and 7: Editor’s Page Dear reader, Prasoo
Page 8 and 9: PANORAMA A“M&A”ZING INDIA 8
Page 12 and 13: PANORAMA MERGERS AND ACQUISITIONS :
Page 14 and 15: PANORAMA the Public Announcement, i
Page 16 and 17: PANORAMA DERIVATIVES A Critical Ass
Page 18 and 19: PANORAMA Competitive impact: This f
Page 20 and 21: GLOBAL PERSPECTIVE A BIG RICH INDIA
Page 22 and 23: PANORAMA a patriarchal system, whic
Page 24 and 25: TRENDS Jet Airways - Air Sahara mer
Page 26 and 27: TRENDS report stated that the gover
Page 28 and 29: TRENDS THE SURGING TSUNAMI - MERGER
Page 30 and 31: TRENDS established giants of the in
Page 32: TRENDS The FII funds inflow for the
Page 35 and 36: MERGERS & ACQUISITIONS The golden b
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Page 39 and 40: MERGERS & ACQUISITIONS Ltd, tractor
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Page 53 and 54: MERGERS & ACQUISITIONS Introduct
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RESEARCH βQ = 0. (12) Finally, a C
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RESEARCH Tabel 3 Test of Structural
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MERGERS & ACQUISITIONS The Main Ide
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MERGERS & ACQUISITIONS D) Multinati
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I.T. = Business Growth At Planman T
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MERGERS & ACQUISITIONS An abundance
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MERGERS & ACQUISITIONS ber 2006, Qa
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MERGERS & ACQUISITIONS Kravis Rober
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MERGERS & ACQUISITIONS percent abov
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MERGERS & ACQUISITIONS The Current
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D A R E T O D R E A M : S T R A T E
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