The Acquisition Circus

Participating in a debate at the Harvard Business School last

fall on who would rule the world, some of us had argued that it would not be

long before the center of gravity of global commerce moved firmly to Asia. Even

then it seemed to many of my American and European friends that such statements

were mere bravado and that it would take a decade or more for Indian and Chinese

firms to become true global leaders in any real sense-except for electronics

manufacturing in China and IT services from India.

Our arguments probably stood vindicated when, after an

interesting mail group interaction of the HBS alumni, one of the most diehard of

our British friends acknowledged that with the Tata group, headed by another

Harvard alumnus Ratan Tata, making a unprecedented ten-billion-dollar bid for

Corus, the Asian bid for world dominance was surely in place. Following the

Mittal-Arcelor deal, this amazing bid has shown the world that Indian CEOs have

decided to stand up and be counted amongst the leaders of the new world.

Speaking to Baba Kalyani, Chairman of Bharat Forge at a garden

party in Pune just before Diwali, I reminded him that a couple of years ago he

had talked about going the acquisition route and becoming the world's Number

Two player in the forgings industry, to which Baba replied, quite simply, "Ganesh,

I have told the world openly and I will tell you now-next year we will be

Number One!"

The interesting part is that it's not just the Tatas, the

Kalyanis and the Mittals; everybody is getting into the acquisition mode.

What really makes an acquisition successful? It's one thing

for a medium sized company in India to buy a smaller firm, but quite a different

proposition to achieve a successful integration. Our own experience in buying a

SAP company with US and India operations and successfully integrating that into

our global Enterprises Applications business unit has shown that successful

M&A has three basic imperatives...

• Compatibility of the buyer and seller from a cultural
  
  standpoint: This is obviously easy for Indian management to achieve, but
  
  each and every person in the firm must be integrated to avoid divisive
  
  forces.

• Alignment of goals during and after the transaction: Young
  
  companies have proud leaders and ambitious goals and the worst thing that
  
  could happen is for some integration manager to ride rough shod over the
  
  young team's aspirations.

• Multiplying the business potential after acquisition: Many
  
  acquisitions are sold on the basis of the value multipliers that the
  
  synergies would provide, but this needs work and a willingness on the part
  
  of both companies to align their marketing and execution models to avoid
  
  confusing the sales force or the customer.

Our pleasurable experience has largely been by preserving the

autonomy of strategy and management style within our SAP entity and yet enabling

new revenue streams to flow in through a global sales force taking them into the

fold and selling their services to a much larger prospect base. Add to that

tremendous efforts by the Marcom teams in brand integration and positioning and

the Human Resource teams in values rollouts and best practices sharing and you

have a potent formula for success!

Do all M&As achieve their short and long term objectives? If the

objective is to pump some temporary adrenalin into the system, any acquisition

handled in any way will do, but if there is serious strategic intent, serious

work is required to plan and execute any M&A program. Will some of our

recent M&As like the EDS acquisition of Mphasis and the multiple small deals

being done by our small and medium IT companies prove to be the result of hard

work or frivolous play? Only time and the hard work of integration teams will

provide the answer.

The author is deputy chairman & MD of Zensar and is chairman of the

Nasscom Innovation Forum for 2005—07. He can be reached at ganesh@cybermedia.co.in