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Acquisitions in India April 4, 2007

Posted by breichen in Acquisitions, Growth.

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.