Mergers & Acquisitions: India Shining

International mergers and acquisitions have become something of a fashion statement among Indian companies these days, as they change their character from local to global. The positive outlook of the Indian economy in recent years has been one of the prime reasons behind this upsurge. Indian companies are now looking to expand their base to overseas territories and establish their presence in the international market. From pharma giants to IT service providers, India is witnessing a major increase in its international presence.

Overseas investment by Indian companies has increased in Europe in particular. India is now counted among the five largest investors in British companies and equities. Stock broking and financial firms happen to be the prime targets. With an increase in the frequency of takeovers and joint ventures at a multinational level, Indian companies are also opening up to the idea of collaborating with foreign companies for specific purposes like acquisition of distribution rights, research and establishing a brand image in specific sectors.

The pharmaceutical segment, especially, has shown great maturity in inking deals at an international level. Instead of aiming for high-maintenance targets, they have restricted their focus to small, manageable deals with a focused market strategy. For instance, pharma honcho Piramal Healthcare does not stick to the conventional approach followed by its counterparts. Instead, it focuses exclusively on development in the custom manufacturing segment for overseas buyers. Besides, it has also targeted the German supply chain of blood plasma products. Then there are companies like Glenmark that have built their presence in particular counties like Poland. In recent months, Glenmark has acquired seven Polish companies.

The African and Middle-East markets have also become hotspots for Indian companies. Reliance Communications has repeatedly tried to expand its share in the African telecom market. It recently acquired Uganda-based Anupam Global Soft Ltd. Instead of trying to find a footing in developed countries that have already been saturated by telecom service providers, Reliance aims to exploit developing markets, particularly in Asian and African countries. Such acquisitions have also been facilitated by initiatives by the Reserve Bank of India and European banking agencies, which provide low-interest capitals to finance such transactions.

The crème de la crème of international takeovers was the Tata Motors’ acquisition of Jaguar-Land Rover earlier this year. It was a high point for the Indian automobile industry, which witnessed a record eighteen deals last year. It was followed by another high-profile takeover: infrastructure giant GMR acquired a fifty per cent stake in US-based power company Intergen, for $1.1 billion.

However, as the frequency of international deals increases, so does the rate of failure. Problems pertaining to purchase price adjustments have increased in recent times. Also, issues like lengthy negotiations, drafting of agreements and delays in approval by regulatory authorities make the process even more tedious.

Gone are the days when the proposal of an Indian takeover of a French steel giant (read: Arcelor’s takeover by Lakshmi Mittal) was viewed as a hostile bid. Today, India Shining has truly gone global with Indian companies vying for a spot in the international limelight. With the year 2007 proving to be a dream run for Indian M&A experts, one can only wait and watch what the current year has in store.

Namrata Singh

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