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September 14, 2009

"India to lag in outbound M&A action"

In an article for Business Today, HBR Senior Editor Anand P. Raman says companies from China, Brazil, and Russia - which are cash-rich and less leveraged than Indian companies - will take the lead in future outbound M&A transactions.
Chinese and Latin American companies will use M&A to internationalise rather than globalise. They will try to buy several businesses in the same country or in neighbouring countries instead of hankering after one company with worldwide operations...In 2008, Brazilian companies acquired 23 more enterprises to create pan-Latin American leaders, or multi-Latinas.

Three, companies will acquire more small and midsize businesses overseas instead of acquiring giants. Indian companies may not have much of a choice; they’re busy digesting the big companies they took over before the financial crisis erupted and so will focus on small and strategic acquisitions. The shift has also become perceptible in China since global acquisitions left both TCL and Lenovo with hangovers.

Emerging giants will also experiment with new ways to strike up partnerships overseas, particularly to secure raw materials in other developing countries. For instance, China’s banks have been buying stakes in or extending loans to foreign companies. China Development Bank recently lent $10 billion to Brazil’s Petrobras in exchange for a long-term supply of oil.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at