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M&As — a Dying Breed?

So are outbound mergers & acquisitions (M&As), in which Indian companies acquire foreign assets, a dying breed? One school of thought says that, for some time at least, it’s a closed chapter. The other school feels it is business as usual. “I think both are right,” says Rajan. “The deal market will go through a dormant phase primarily because of volatility in valuations and the squeeze in the credit markets. However, deal flow continues to be very strong as there are some very high-quality companies that are potentially becoming available. Smart Indian companies should be getting ready to take advantage of that once the markets settle down.”

“I think this is a temporary setback, the world over, rather than for India in particular,” says Rajesh Chakrabarti, assistant professor of finance at the Hyderabad-based Indian School of Business (ISB). Adds Narayanan Ramaswamy, executive director of KPMG Advisory Services, an international network of professional advisory firms: “Globally there is going to be a slump, a wait-and-watch period. It is not at all surprising. But I don’t think that corporate India has lost its appetite for acquisitions.” Sudip Banerjee, CEO of L&T Infotech, who earlier was president (enterprise solutions) at Wipro Technologies, is even more positive. “There are a lot of cross-border M&A deals that have taken place and more are in the offing,” he says. “Even our company is looking at such deals and I know about a few other deals which are currently going on.”

The numbers can be interpreted in different ways. The BusinessWorld-Thomson Reuters M&A deal tracker lists only one deal of any significance in October (up to October 20) in which an Indian company has been involved. This is the US$505 million purchase of Citigroup Global Services by Tata Consultancy Services (TCS). But this is essentially Citi’s India-based captive business process outsourcing arm, so it does not qualify as an outbound merger.

The Grant Thornton deal tracker, a widely-followed newsletter, seems to indicate a slowdown of sorts in September. “The total number of M&A deals announced in September 2008 stands at 35 with a total announced value of US$3.69 billion as against 31 deals amounting to US$4.63 billion in August 2008,” notes the report. “The most significant deals have been Daiichi Sankyo increasing its stake to 58% (through an open offer) in Ranbaxy Laboratories for US$1.7 billion followed by UAE-based Emirates Telecommunications buying a 45% stake in Swan Telecom for US$900 million and Suzlon Energy increasing its stake to 86% in REpower Systems AG for US$390 million.

[ via: India Knowledge @ Wharton ]