india going global.indd - The IIPM Think Tank

MERGERS & ACQUISITIONS
The 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 going hammer
and tons and doing exceptionally well, seem to be the
most obvious reasons which have made her a prominent
economy on the global map today.
There 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 global
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 global 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. The 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. The 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.
The 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.
The 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
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