Investment bankers are forecasting a stellar year for mergers and acquisitions in Asia following a leap in the value of both inbound and outbound transactions in 2010, according the the Financial Times. The paper said that outbound M&A soared 166 per cent to a record $126.1bn in the region (excluding Japan and Australia), according to Citigroup, with total deal flows including inbound and intra-regional transactions jumping 48.8 per cent to a record $470.5bn.
In India, for example, Mukesh Ambani’s Reliance Industries has spent $3 billion in American acquisitions, mostly of shale oil but it ready to invest another $7-9 billion if they can find good deals. Godrej, Jindal, Tata and other groups have made significant buys earlier.
Meanwhile India’s Business Standard newspaper report a similar trend. Among the 41 per cent of Indian companies planning an acquisition in the next three years, the motivational factors for growth are access to new geographic markets (64 per cent ), acquiring new technology or established brands (58 per cent), building scale (55 per cent) and access to low-cost operations (37 per cent). The report says that there’s been a noticeable shift in preference from last year, when acquiring technology or established brands (57 per cent) was the key factor. This year, there’s been a 20 per cent jump in access to new geographic markets, making it the most sought-after medium for growth.
Matthew Hanning, joint head of investment banking for Asia at UBS in Hong Kong says there are very few acquisitions that Indian companies cannot afford to finance. “If the deal and the valuation make sense, there is no shortage of capital” in that part of the world.
Takeway: Watch out for more global M&A involving Indian companies. This can affect you even if you are not an M&A player. For example your supplier or customer from India could be consumed by a major capital transaction leaving them less bandwidth to focus on you. Alternatively an M&A transaction may suddenly convert an Indian partner into a potential competitor or perhaps into a much better partner. Stay tuned.
February 24, 2011 No Comments
Cardiac Science of Bothell, Washington has agreed to be acquired for $2.30 per share by a medical equipment company based in Bangalore, India. The all-cash deal represents a 10 percent premium to Monday’s closing price of Cardiac Science shares, the companies said Tuesday.
Opto Circuits (India) Limited of Bangalore, which will pay $54.6 million for Cardiac Science, is a developer and marketer of healthcare equipment including pulse oximeters, patient monitoring systems, sensors, digital thermometers, anesthesia and respiratory care equipment, and stents. It reported revenues of $243 million in the latest fiscal year, and sells primarily in the US, Europe and South East Asia. Opto Circuits will fund the purchase through cash on hand and lines of credit.
Opto Circuits Chairman and Managing Director Vinod Ramnani said the deal helps his company venture into the noninvasive diagnostic monitoring and “high-growth” automated external-defibrillation markets. “This transaction is expected to open many new global markets for Cardiac Science’s products and will greatly enhance Opto Circuits’ product offering and presence in the United States,” Ramnani asserted.
While companies from India are getting ambitious about M&A in the West, they continue to be value-seekers as we see in this deal to buy a distressed medical device company. Earlier this year, the company agreed to replace 24,000 AEDs for U.S. medical facilities and emergency services under a revised recall plan the company has negotiated with the U.S. Food and Drug Administration. So don’t expect a wave of such buyouts in the next quarter.
October 20, 2010 No Comments
My friends Vipul P Jain in Mumbai and Narendra Kale in Chicago run one of India’s most interesting boutique outsourcers, Kale Consultants..
Rare among Indian IT companies Kale has designed software products for the banking, hospital and airline businesses over the years. I first met Narendra my friend Vipul hire the company to create the first computer software installation in India, for the Taj Palace Hotel in New Delhi.
The company went public in the late 1990s and this week it announced that Spain’s Accelya Holding World is buying a controlling stake, see the Financial Times story today.
September 11, 2010 No Comments
In recent posts, I have reported how India continues to grow at an unprecedented pace despite the global slowdown. Indian companies are leveraging this growth streak to strengthen their corporate portfolios, particularly by making outbound acquisitions in western markets.
In April-June 2010 quarter the number of acquisition transactions involving Indian companies was roughly the same as one year ago, 155. But the actual dollar volume shot up 482 percent to $16.9 billion from just $3.5 billion a year ago. More important is the composition of those transactions: a year ago only 6 percent involved overseas partners but this shot up to over 50 percent in the last quarter.
Western executives need to watch this trend closely since India continues to forge a path distinct and different from other developing countries as its national wealth grows and as its companies become more ambitious globally.
The oil and gas sector produced about a third of the aggregate deal value during April–June 2010. The largest deal of the quarter was led by Indian public-sector companies - Indian Oil Corporation, Oil and Natural Gas Corporation (jointly with Petroliam Nasional Bhd and Repsol) who acquired a 40% stake in Venezuela’s Empresa Mixta for $4.8 billion. Mumbai-based, Reliance Industries acquired an interest Marcellus shale deposits via Atlas Energy ($340 million) and via Pioneer & Pek LLC for Eagle Ford Shale ($266 million) in Pennsylvania and Texas respectively. Other prominent transactions were Hinduja Group’s acquisition of Luxembourg-based KBL European Private Bankers for $1.7 billion. The technology sector witnessed maximum activity with 22 deals, followed by industrial products (15 deals), financial services (14 deals), infrastructure (13 deals), and metals &mining (11 deals).
July 3, 2010 No Comments