The Telegraph
Since 1st March, 1999
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India Inc takes fancy to M&As

New Delhi, Nov. 26: Mergers and acquisitions seem to have fired the imagination of India Inc. A session on dealing with the aftermath of mergers and acquisitions today saw big names like Ranbaxy CEO and managing director D. S. Brar, Indo Rama managing director O. P. Lohia, Adi Godrej, Y. C. Deveshwar of ITC, Sunil Munjal of Hero Honda and Euro RSCG chairman Ishan Raina hold forth on the issue.

As O. P. Lohia put it, “The merger and acquisition game in India has started in right earnest, any good company worth its salt is looking for acquisitions if the synergies of doing so are right.”

Brar said that Ranbaxy is looking for acquisitions in Europe and the US. The Ranbaxy chief said his company was also open for domestic acquisitions, “if they are strategic fits.” However, he added the domestic companies that Ranbaxy would like to acquire are “unfortunately not up for sale.”

“Mergers and acquisitions in India have to deal with crucial issues of capital convertibility arising out of cross-border mergers. Secondly he said the due diligence process in mergers often have a number of loopholes which companies have to be wary of,” Brar said.

Ranbaxy made its last domestic acquisition seven years ago and since then has acquired companies overseas only.

Ishan Raina was sceptical about mergers in the advertising business. More often than not merger deals have not worked in the business of communications, he said. Advertising experts say this is so as there are cultural differences between communication firms that are more difficult to resolve.

Hero Honda director Sunil Kant Munjal said his motorcycle company has decided on acquisitions both in India and abroad. Rival Lohia said his company will be open to acquiring new plants, “if there are adequate synergies”.

Y. C. Deveshwar said that In India, mergers and acquisitions would have to deal with issues typical to family businesses. “The family businesses will deliberate on what they are going to leave to their next generation”.

Adi Godrej said his company has made seven acquisitions in almost as many years and he is unhappy with only one of them. “Strategic intent is the most important thing in an acquisition,” he said.

Art Bert, AT Kearney’s managing director for south Asia, who was one of the panelists, said global experience shows that only 29 per cent of mergers and acquisitions world-wide deliver the expected benefits.

Bert counted lack of communication as a key factor for the failure of mergers, and said creating a sense of urgency for the process and addressing cultural issues for global mergers are crucial for success.

While both AT Kearney and Lazard Capital predicted rise in mergers and acquisitions in India, domestic merchant bankers were apprehensive that corporate marriages can be marred due to lack of a congenial regulatory environment.

“Indian companies are plagued by the persistence of uneconomic and fragmented capacities resulting in loss of value. While consolidation has not happened yet, India Inc is poised for a major restructuring exercise,” Lazard UK chairman Udyan Bose said.

The consultants warned of the aftermath of the mergers and acquisitions, saying it often led to a fall in shareholder value.

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