india going global.indd - The IIPM Think Tank

TRENDS
established giants of the industries like Tatas.
Of course not all of the deals are outbound and cross
border acquisitions, but there are also domestic buyouts
and consolidation, a good example of it is seen in the
banking space wherein small private sector banks like
Nedungadi Bank and Lord Krishna Bank have been
merged with more powerful Banks in order to remain
competitive and to confirm adherence, compliance to
the regulators` benchmark rates.
The Hidden Picture:
Lost in this story abounding in outbound, cross border
deals is that firms are also hiving off, de-merging in an
attempt to focus better or effect change in control by
offering certain units to other foreign firms and willingly
merging within themselves to form a well, slimmer, fitter
and powerful units. Biocon divesting its Industrial
Enzyme unit to a Norwegian firm – Novozymesa is a
case of strategic fit wherein it can be more focused on
its Bio-pharmaceuticals space, maintaining faster growth
momentum while leaving behind food industry application
areas. Similarly IBR Infrastructure Developers-
IBRID merged all subsidiaries and SPVs with themselves
to form a single holding Co. The objectives achieved are
integrated approach, greater control of activities in the
construction projects apart from globally valid true core
transparency and ethical practice of accounting in the
books. The restructuring exercise is carried out to gain
optimum utilization of resources and re-focus on the
objectives and changed business dynamics.
Why the deal
To have instant growth, to gather and retain growth
momentum, to gain competence and jump on to the outsourcing
bandwagon and explore/exploit better revenue
yielding opportunities. Here the vital point to be noted
is the time frame with which one has to be sync.
Augmenting export earnings, partially de-risking geopolitical
competition, gaining access to newer markets
thus overriding cyclical downtrends in established exposure
domains is a strategic move in M & A situations. To
take on domestic competition, to retain competitive edge
with economies of scale, wider product range and simultaneously
to maintain global level quality and standards
in business practices, the bottom line in all these activities
is to be able to realize economies of scale, enhance
product range and market share, to improve margins
and add to instant growth while complying with global
standards, all form compelling forces.
Ways & Means:
Consolidation of businesses by large industrial houses,
multinationals operating in India, increasing competition
amongst domestic companies and against imports
has all combined to spur mergers and acquisitions activities
in India. In response to the growing business,
The bottom line in all these
activities is to be able to realize
economies of scale, enhance
product range and market share...
regulators have issued guidelines to facilitate smooth
transactions.
Mergers and acquisitions take the form of
● Modes of cross border acquisitions
● Categories of cross border acquisitions
● Open offers
- Acquisition of shares
- Acquisition of undertaking/assets
● Substantial sale of equity
● Corporate partnering
Strategic investments
● Earn out acquisitions
● Public to private– Leveraged buy outs
● Sale of distressed assets by financial intermediaries
30 Need the Dough July-October 2007