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M&A, Venture Capital, and Private Equity: A Thriving Investment Climate
M&A activity has also grown. Large firms pursuing scale and global reach through M&A have
included Tata Group, Bharat Forge, Ranbaxy Laboratories, Oil and Natural Gas Corp. (ONGC),
Infosys, Wipro, Essar, Reliance Group, Apollo Group of Hospitals, Bharti, Airtel, pharmaceutical
and health care provider Nicholas Piramal Ltd., and Suzlon Energy. But smaller firms have
also taken advantage of investment opportunities. In what promises to be essentially a reverseoutsourcing
deal, in August 2009, Reliance Big Entertainment invested $325 million for a 50%
stake in Steven Spielberg’s Dreamworks SKG, gaining a share of the profits and the right to distribute
its products in India.
Of 86 M&A deals valued at more than $35 billion in the U.S. during 2007, a third involved small
and mid-sized Indian enterprises. Their combined value was up dramatically from $15 billion
worth of such deals in 2006 and $4.3 billion in 2005. A March 2008 Ernst & Young study, commissioned
by the Federation of Indian Chambers of Commerce and Industry (FICCI), suggested
that direct investment in the U.S. by 46 Indian enterprises—72% of them small and mid-sized
firms, and nearly half in the IT sector—created an estimated 65,000 jobs in 2007 alone.
A weak dollar has heightened the appetite of Indian firms for U.S. acquisitions with an eye toward
expanding markets, achieving global scale, acquiring management expertise and contacts,
and accessing specific technologies, processes and talent quickly. Where India’s domestic market
may provide few opportunities to grow through acquisitions, M&A focused on the U.S., Europe
and other Asian markets offers Indian companies the opportunity to acquire technologies, access
new management pools, and increase their product lines.
Bay Area Connections
Throughout the previous sectoral analyses in this report—in financial and legal services, semiconductors,
IT services, real estate, energy, computer networking, and the Internet—we have
highlighted India investments undertaken by specific firms, in the context of their overall India
presence. Here we attempt to provide a sense of cross-border venture capital, private equity, and
M&A activity, in both directions.
An August 2006 Evalueserve study identified 23 VC and 21 private equity firms in the U.S—
many of them based in San Francisco and Silicon Valley—that had significant existing or
planned India investments. Original research done for this report in 2007 identified 54 Bay Area
firms with some level of cross-border, India-related investment in all categories.
Comprehensive statistical data on cross-border investment is not readily available, but it is possible
to piece together from interviews and secondary research a flavor for investment trends as
they relate to California and the Bay Area.
The California Public Employees’ Retirement System (CalPERS) registered with
SEBI as an FII in July 2004, committing $100 million to the Indian equities market.
CalPERS’ three emerging market fund managers made the decision to invest after
India’s successful April 2003 rollout of automated procedures to settle equity trades within two
days of execution—a standard known as T+2 rolling settlement—down from three days in 2002
and 5 days in 2001. The pension plan’s initial strategy focused on mid-cap stocks over a 3-10 year
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