Jul 31, 2007

Indian Finance Minister urges businesses to go global

Probably the first time that the FM has urged companies to go the inorganic way to global growth! In an interview with NDTV he said:

Having built large business in India, I sincerely hope Indian business will not be content with that. And in a globalized world, the only way you can protect your business is to acquire global leadership. And while organic growth is certainly welcome, given the pace of globalization, the pace of M&A's and amalgamations; if you wish to retain your leadership position, you have to go the inorganic way. Today we support Indian industry going global to acquire business abroad. We have the resources, we can afford to give the foreign exchange, we have the human resources (and) we have a huge market in India. So that's the way to go.

NDTV: Will government provide funds for M&As?

Chidambaram: I don't think funds are a problem. We have had major acquisitions in the last 12 months, the Tatas acquired Corus, Suzlon acquired a very large wind energy company. They have had no difficulty with funds. But whenever they came to us for any kind of support or comfort, we have given them that support and comfort. And if Indian business wants foreign exchange, that is also available today. So this is the time to go global.

The big issue when M&A happens, specially in the services sector that does not have too much IP assets, is the focus on retaining key talent. That unfortunately is not something that the Finance Minister can help, but as we have seen lots of businesses are willing to pay a premium to key leadership and other employees to retain them in the case of a acquisition.

As the Economic Times reports:

Some of the big ticket M&As that have resulted in mega buck pay-outs to employees in the recent times include Lowe, Mastek, Intelenet, Manpower, Grow talent and Gallup MBA, just to name a few.

Take the most recent case of ad agency Lowe. Last Friday, all permanent employees at the ad agency Lowe — from the managing director down to the peon — were laughing their way to the bank. The payout to some of the employees on account of 51% stake sale in the firm to global major, IPG, touched Rs 1 crore.

However, that needs to be thoughtfully done as in Lowe's case, they went by the letter and not the spirit, resulting in the freelancing consultant creative folks not getting a paisa from the payout.

Learning for organizations, go global, acquire, but be sure you treat the people with sensitivity and think through three times about repercussions of any decisions.

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