Page 231 - DMGT548_GLOBAL_HRM

Global HRM

Notes 2. Tata Steel: Since mid to late 90s, British Steel mandated a well-known global investment
bank with a specific brief to scout around for opportunities in the Indian subcontinent.
One proposal the bank apparently made to British Steel involved picking up a majority
stake in the country’s largest private sector steel maker, Tata Steel. The deal did not
materialise, and British Steel went on to merge with Koninklijke Hoogovens of the
Netherlands in October 1999. Together they formed Corus, the same company that Tata
Steel recently agreed to buy for $8 billion.
Tata Steel-Corus transaction is best evidence of the hunger of Indian promoters to hog the
global stage. It’s also a confirmation of how one acquisition can transform the acquirer
from a distant also-ran into a global giant to reckon with. From the mid-fifties in the
global steel ranking, Tata Steel has pole-vaulted into the league of the top five steel
producers worldwide. It reduces its risk to fluctuating prices. In fact, it could also control
prices now.

In the case of the Singapore-based NatSteel acquisition, Tata Steel had to integrate
operations spread across seven different countries. It started out by creating platforms
where learnings could be shared between the companies. Tata Steel is superior in steel
making while SatSteel had better products and solutions for the construction sector. In
both the NatSteel and Thailand-based Millennium Steel acquisitions Tata Steel retained
the top management. The Tatas also succeeded in keeping back the CEOs and all employees,
something that would not have gone unnoticed when Corus Steel was making up its mind
on Tata Steel’s merger offer.
3. Tata Tea: Tata Tea’s buyout of Tetley gave it a foothold in the UK market. The deal with
Glaceau will allow Tetley to enter the US market and give Glaceau a chance to tap the UK
market. When Tata Tea zeroed in on bottled water marketer Glaceau in a landmark $677
million deal, the company’s top brass glanced over a host of options. It scanned the market
and looked through many companies.

For a group with a stated objective of growing via the inorganic route, the Tatas have
mastered the art of acquiring companies overseas, be it new business or those which are
several times their own size. The key is to lock in the commitment of the target company’s
management towards future growth. Locking in management commitment has been the
mantra of success for Tata Tea in its acquisition of Tetley, Jemca, Good Earth, Eight O’ clock
Coffee and recently, Glaceau.
The Tatas have always opted for negotiated acquisition. They plan the entire integration
process during the negotiation phase with emphasis on constant communication between
the top management of both companies. They work with the management of target
companies to identify areas of synergy and then set up joint teams for each of the identified
areas to execute on the game plan. The objective is to show results in terms of operational
improvements and cost savings.

Self Assessment

Fill in the blanks:
13. JV is a separate legal organisational entity, controlled jointly by its ………. and created by
the investment of two or more parent firms.
14. Tata Tea’s buyout of ……… gave it a foothold in the UK market.

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