Action in the Strange Bedfellows Dept

The

AOL-Time Warner merger made a $350-billion company and shocked the world in

2000. Amidst dot-com madness, little AOL.com used its $163-billion market cap to

buy out poor old-economy media giant–complete with CNN, Time, Warner Bros,

HBO, et al, and worth a mere $83 billion in the market.

AOL-TW set another record this year, with a $99-billion loss, the greatest in

corporate history. Okay, not operating losses. The concluding $45-billion charge

in Q4 was mostly due to depreciation in AOL’s value. But that spelt a reversal

of fortunes, the end of the AOL supremacy. With ex- or pro-AOL execs Steve Case,

Gerald Levin, and Robert Pitmann out of the way, AOL-TW is finally run by TW

execs, just as most of the old-economy old guards (including Ted Turner, who has

just stepped down as vice chairman) wanted.

India has seen few "big" M&As, especially in the tech business.

Most have been quick and matter-of-fact, such as Airtel’s acquisitions in

Bangalore, Chennai, Kolkata, et al. The players usually keep things quiet, in

the run-up.

But February saw some M&A action.

First, Aptech’s fairly quick sale to SSI. Quite a logical move for Atul

Nishar, getting away from having to worry about a training business under high

pressure, to focus on Hexaware, the more profitable and growing software

services company. For the merged entity too, it makes sense to move to an

operation with the scale necessary to compete with NIIT. It was just the

unexpectedness of #3 SSI, struggling with dropping margins, suddenly buying #2

Aptech’s founder’s 28% for a mere $5 million.

The next surprise was the acquisition of a DQ Top 20 company.

GTL announced its acquisition of the Singapore-based Redington Group,

including Redington India. Whatever would this telecom equipment and services

company want with a thoroughbred IT distributor? It pushes it up almost into the

DQ Top 5, but sheer size could not have been the motivator. Nor the wafer-thin

margins of trading houses (thus the Rs 500-crore valuation of a Rs 3,000-crore

group). Yes, GTL gets the a potential help-desk and BPO business that Redington

is ‘sitting on’, though its distribution partnerships with vendors and GTL’s

1,600-odd tech staff could dig into that. Redington’s customer base, through

the channels, can be a further source of services business. All this is a bit of

stretch, though.

So we have two contrasting M&As. One–the sell-off of a training company

to a competitor, so that the remaining services entity can focus better. The

other–a services business buying a trading house, for customers and more

business. Expect to see more action on the M&A front in 2003.

Prasanto K Roy