TRENDS M & As Calling: Indian Inc. on a Buying Binge 34 Need the Dough July-October - 2007 No decision is good or bad in the world of business; it’s the outcome which makes it good or bad...
MERGERS & ACQUISITIONS <strong>The</strong> golden bird of the world is gaining its glitter once again and recent times bear a true testimony for her accomplishments. India’s economy crossing the $1 trillion GDP benchmark, rupee value getting stronger against the USD, mounting inflation taking a back seat, Sensex making through the 15k mark and innumerable other instances that delineate and disseminate the successful saga of her corporate world <strong>going</strong> hammer and tons and doing exceptionally well, seem to be the most obvious reasons which have made her a prominent economy on the <strong>global</strong> map today. <strong>The</strong>re is no company in the fortune 500 list, which does not want to do business either with India or inside India. Ranging from IT titans like Microsoft, IBM, Intel, Dell, to world’s largest retail chain Walmart, Japanese car manufacturer Hyundai and Toyota to French major Renault. From biggest telecom company Vodafone to <strong>global</strong> financial institutions like Bank of America, Citigroup, ABN Amro and HSBC, all of them have announced their future plans for the country along with the humongous investments that they intend to make. And why would any company not contemplate of commencing its operations or for that matter not want to do business with India, especially when they get one of the most educated and well versed workers, with sound knowledge of the <strong>global</strong> market, at comparatively and relatively lower price. (According to estimates by the year 2010, India will have the highest number of English speakers). Be it world leaders in car manufacturing like the General Motors or domestic corporate giants like Reliance, Bharti, Tata et al, they have all been capitalizing on the human resource available in India for quite a longtime now. And all the financial accomplishments of these enterprises could also be attributed to these reasons, which have eventually helped the country becoming only the 12th nation to cross the trillion dollar GDP figure. Going Hammer and Tongs: Not only this, in the last couple of years the corporate India has made valuable attempts for expanding their operations in the overseas market as well and the recent figures of both inbound as well as outbound Mergers and Acquisitions(M&As) exemplify this fact pretty well. In the past 15-18 months, Indian conglomerates left no stone unturned in acquiring, merging or tying-up with their foreign comrades and doing business that could and most certainly would contribute to India’s economic growth. Taking full advantage of their company’s strong revenue base, Indian corporate leaders executed the plans to acquire and merge with the European giants (though at times with comprehensive risks, as in case of Tata-Corus or Hindalco-Novelis deals) in order to have an access to markets abroad. According to the Grand Thorton report, the total number of deals that took place in the year 2006 was 782 as compared to 467 in 2005, out of which 480 were M&A deals and the rest 302, the private equity ones. Altogether there were 480 M&A deals with a total value of about $20.3 billion in 2006 with an average deal size of $42 million. Going by the sectoral examples, IT happened to be the leading one, which garnered $2.9 billion worth of deals. <strong>The</strong> major deals in that segment included EDS’s acquisition of majority stake in Mphasis BFL, RR Donnelley’s acquisition of Office Tiger, i-Flex’s acquisition of Mantas Inc etc. Additionally, there were 8 deals of over $500 million (excluding Tata-Corus), of which Dr. Reddy’s Laboratories acquisition of Betapharm, Suzlon Energy’s of Hansen and Citigroup’s increasing stake in HDFC were both the biggest as well as the most talked about ones. <strong>The</strong> report further divulges that IT leads the M&A volume proportion with its 20 percent share of total number of M&A deals, while Pharma, Healthcare & Biotech contributed to the second highest share at 10.4 percent. <strong>The</strong> cross border deals significantly increased to 266 with a consequent appreciation in the worth thereby reaching a whopping $15.3 billion last year as against 192 deals with a total worth of $9.5 billion in 2005. Where at one hand there has been a phenomenal growth rate in outbound deal value as well as volume, inbound deals have remained almost the same as compared to the year 2005. <strong>The</strong> largest outbound acquisitions have been in Europe, which accounts for 42 percent of the deal value, followed by North America with 24 percent. United States and United Kingdom are the two countries that garnered the maximum outbound deal share, at 29 percent of the total deal value. Sectorwise Break up- M&A Deals by Value Mar-Apr 2007 Source: Grant Thornton July-October - 2007 Need the Dough 35
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