Last week, the visit of Prince Andrew, the Duke of York, to Mumbai for the UK Trade & Investment Business Awards?his first visit to India?underscored the importance Britain is according to Indian business and enterprise. As Indian companies globalise further, and move forward with the help of bold acquisitions like the
Tata buyout of Corus, countries like the UK are taking serious note of the growing importance and clout of India Inc. In his speech, the Duke unveiled some very interesting figures, which underscored how Indian business is growing exponentially in the UK.
Consider this: the number of people travelling between the UK and India has grown sharply, reflected in the number of flights to and from India. In the past 18 months, this number has grown dramatically, from 19 to 100 direct flights a week. The number of Indian companies with operations in the UK, too, has gone up to over 500. From only 20 investment projects into the UK from India each year four years ago, last year this figure jumped 110% bringing the 2005-06 figure to 76, totalling a hefty 1.02 billion pounds.
What is most dramatic of all, India has jumped from 8th position to 2nd in terms of FDI into the UK, toppling Japan, and is now second only to the United States. Similar growth is bound to be witnessed elsewhere as Indian corporations spread themselves across the globe, into markets of strategic significance.
The Tata-Corus deal has dramatically changed the equations between Indian business groups and foreign companies forever. No longer are business houses from India shy of attempting what M&A-watchers would call ?audacious? takeover attempts, leveraging their own balance sheet strength and that of the target company. No longer is it a surprise to see a smaller company taking over a much bigger one, by way of leveraged buyouts and structures like special purpose vehicles. And the consensus among most industrial houses now is, if the Tata Group has shown how the country?s biggest overseas acquisition can be executed, there are enough Indian corporations ready to take up similar challenges globally.
The days ahead will see more such business groups?cutting across sectors?attempting such bold takeovers, and banks, both Indian and international, are already taking note of these strategies, sensing business opportunities.
But in all this, it?s also equally important to be aware of the pitfalls that could be staring such companies in the face as they endeavour to grow bigger and more global. A leading Indian industrialist says one of the key challenges will be that of integrating the acquired businesses with the Indian ones. An important issue will be the cultural fit of the target company with the acquiring group.
If large businesses are to be acquired overseas, it is not going to be a cakewalk even for the most savvy Indian business house |
If large businesses are to be acquired overseas, it is not going to be a cakewalk even for the most savvy Indian business house to just walk in and ensure a smooth transition or, in some cases, a turnaround. Other than going deep into the ?psyche? of the acquired company, tough decisions will often be needed, management cultures understood and new growth strategies chalked out. And the fact that these will have to be done in a foreign country makes the challenge that much greater.
Some industrialists say it is not enough for the Indian company to send its top managers to sit on the boards of the acquired companies and help the management teams of these companies. There needs to be enough depth in the managements of the Indian groups?and global expertise and understanding?to ensure these overseas acquisitions fit in seamlessly with the Indian enterprise.
To that end, Indian business groups will need to ensure their management strength is deepened and has enough global exposure. In many cases, they may even need to hire managers with enough global exposure in complex markets, so that they bring in that breadth of experience to the Indian companies and contribute to these acquisitions strategies.
How Indian companies deepen their management teams and ensure the adequate mix of local and global exposure could end up determining how well India Inc manages this crucial phase of scorching global growth. Because an expensive acquisition, if botched up, can cause lasting damage to value for its Indian shareholders. And as we have seen, shareholders can be quite unforgiving.
