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Acquisitions in India April 4, 2007

Posted by breichen in Acquisitions, Growth.
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So far this year, Indian firms have made/announced 34 foreign takeovers, with an estimated value of $10.7 Billion. Last year’s total acquisitions of foreign companies by firms in India held a value of $23 Billion, which is five times as much as any previous record in India and more than the total investments made in Indian companies by foreign players. These recent acquisitions have been described as a “buying binge” and demonstrate the “new-found respect that India commands in the global arena.”

If the rate of acquisitions continues at the rate is going, this year will definitely have a greater number and higher value of acquisitions of foreign companies by Indian firms than ever before. During March 2007, the Indian steel companyHidalco bought American rival Novelis for a mere $6 Billion. This made it the world’s largest aluminum -rolling company. This incredibly significant deal took place less than a week afterTata Steel, India’s largest private producer of steel, purchased the Dutch firm Corus for $13.2 billion. This price tag was 9 times larger than any foreign acquisition by an Indian organization before this. Both of these deals reflect the conditions which are permeating through India and encouraging Indian organizations, both large and small, to buy globally in the sectors of car parts, pharmaceuticals, energy, etc.

By one estimate, 60% of India’s 200 leading companies are looking to invest this loot in foreign purchases.

The increase in acquisitions by these Indian firms really represent the changing nature of the Indian organization. It can be said that Indian organizations, at the very least the leading ones, are going global. The trend of Indian investments in foreign companies will only continue to rise and these companies will only continue to grow and expand. To my knowledge, India has long been regarded as a somewhat unimportant player in the global market. In recent years, we have seen many large American organizations outsource to India in order to save money. India however, is now becoming a power player and some of these organizations have been able to purchase foreign organizations several times larger than they are. I think that this is very interesting because Indian companies are clearly becoming important characters in the global business world. I think it would be interesting to consider however, the implications of young and unexperienced Indian firms purchasing larger, more established firms. In the instance of Hidalco and Novelis, this would clearly result in enormous organizational change and many adjustments would have to be made. It would be interesting to see how successful some of these Indian acquisitions of foreign firms have been in terms of organizational mergers.

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Comments»

1. Stephanie - April 4, 2007

As India is experiencing this buying frenzy, they are also going are also having more trouble filling jobs. I just read an article in Business Week that reports of that a survey of 37,000 employers in 27 different countries, 41% are having trouble hiring the people they need. “The seemingly inexhaustible pools of cheap labor from China, India and elsewhere are drying up…”

If these workers are moving into more advanced jobs as you suggest, I agree that it will be interesting to see the changes made in those companies, and also which countries will be the next in fulfilling India’s old role of outsourcing for the U.S.

2. collage9 - April 4, 2007

I think that India is defintely becoming a bigger and bigger player in the global business world. However, I wonder how many of these companies actually have the ability, and not just the funds, to take over larger, foreign operations. I feel like some companies there might just be getting caught up in the buying frenzy and are expanding globally just because they don’t want to fall behind. As companies from India continue to make global acquisitions, it will be interesting to see how many of them really succeed.

3. Jordi - April 13, 2007

Historically, India was always a land of great wealth and commerce. THe spice trade that you read about in grade school social studies was often through and to India. India was the site of some of teh original cities thousands of years ago.

Good post! Ncie to not read about Google again ::smile::

Do you tend to think that America’s economic position and influence are waning? OR will this competition be good for US business?

4. Rahul Singhal - April 17, 2007

India’s GDP is growing at between 8 and 9 percent annually and is projected to double from $800 billion today over the next eight years. Private equity and venture investment have tripled in 2006 to $7.5 billion, and exit opportunities for venture- and private equity-backed startups are only expanding as the Bombay Stock Exchange rises and merger and acquisition activity grows.
But I really wonder if this trend is going to stay for long. At times I feel that for most of the “Middle level” companies looking for expansion, an Acquisition is more or less like a “Style Statement” to be in the news.
But I am really proud that Money outflow from India is more than the FDI because too much of FDI in any country is not good for its health. We have live examples for Mexico, Argentina and others…India is not too far

5. Itisha gupta - March 21, 2010

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