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Unit 12: HRM in Cross-border Mergers and Acquisitions

12.3.1 Outbound Deals Notes

Making outbound deals work can prove a minefield. The study reveals the following:
1. Sometimes it’s difficult for a company to digest the fact that a company from a developing
country wants to acquire them. They may fear that the Indian economy is overheated and
worry about impact of a slowdown in India.
2. Foreigners are looked at with suspicion, and Indians particularly as third-world losers in
some countries.
3. As ticket sizes increase from $1 billion to $10 billion, there could be a crunch when it
comes to financing such deals.
4. There is a risk of customers and suppliers jumping ship when a foreign company acquires
a local company.

5. Cultural issues are the biggest challenge for any cross-border acquisition. They can make
or break a deal.
Indian promoters need to treat it with care:

1. Approach the local government.
2. Approach the worker counsel: take them into confidence and assure them of the growth
prospects.

3. Spend time on pre-deal integration planning which could even reduce the deal size.
4. Gain confidence of the customers and suppliers.
5. Keep a close watch on competition. They may take advantage of the situation by ramping
up production and trying to eat into market share.
Indian companies are using acquisitions as a strategy to get a global footprint. M&A is a great
vehicle to put up a global outpost virtually overnight. A flurry of M&As has pitch forked some
Indian companies into the global league.
Tata-Corus isn’t just a one-off an Indian business house thinking, and acting big, Videocon
Industries’ $ 731 million bid for Daewoo Electronics, Dr. Reddy’s acquisition of Betapharm in
Germany for $ 572 million, Ranbaxy’s $ 324 million buy-out of Terapia in Romania, and Suzlon
Energy’s $ 565 million purchase of Hansen Transmissions of Belgium are just some instances of
Indian companies willing to shell out top dollar for instant access to foreign markets.
A host of mid and small cap firms in industries ranging from textiles, consumer durables, fast
moving consumer goods and telecom to energy, automobiles, auto components and information
technology are participating in the rush to cut an outbound deal. In 2005, the total number of
outbound deals was 126, generating a total deal value of $ 4.3 billion. And during 2006 the value
of the 175 outbound deals was nearly $ 20 billion.

Task Critically analyse the acquisitions which Tata Chemicals has made to establish the
global footmark.

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