Introducing the topic- ‘Grow & merge or merge & grow’, Fr E Abraham, Director of Xavier Institute of Management, Bhubaneswar said, “The recent spurt in the M & A deals by the business leaders has led to increased activities on this front. This topic is extremely relevant in the current scenario and for the Xpressions, which is a celebration of XIMB’s spirit of excellence, competition and desire to strive for perfection in everything we do.”
The panel discussion was moderated by Rajeev Dubey, Deputy Editor of Businessworld, who pointed out how 123 companies have raised $26.9 billion for 697 merger & acquisition deals in the recent past.
Participating in the conclave, Krishna Angara, Director- Operations of Hutch Vodafone said, “Merger & acquisition deals require solid game plan. It is not something like that you sit in a board room and plan to acquire a company and you are done with it. To stay ahead in the competition, it is necessary to grow continuously in the size as well as revenue.”
The panelist agreed to this fact that organizations are trapped in the merger & acquisition syndrome for growth. They pointed out that it does not matter to them whether it is organic growth or inorganic growth. “There can’t be a set formula for M & A deals. No game plan can be fixed for this. It does not happen that way, when the opportunity strikes you have to grab with both hands,” explained Mr Angara.
They also discussed how the organizations are going back and moving forward in the value chain to stay ahead in the race. “Nothing comes from the text book in case of M & A as lots of things come from the visionary industry leaders. It is the stock market, which rules today. But for succeeding in the organization, you have to have strong fundamentals and strong growth presence in your home turf,” said Tapal Dasgupta, Senior Vice-President of Wipro.
Further elaborating about this, Mr Dasgupta said, “For M & A deals and managing expectations of the investors, it is important for organizations to grow, grow and grow. It is all about keep growing. Topline, bottomline and growth rate is very significant for companies in a developing country which offers great potential to growth.”
There are several challenges associated with this M & A and dilution of the bottomline is one of them. “It’s not only about the acquiring global company but it is also about the acquiring global brands and talents. There are great risks associated with M & A as it has to be evaluated by the finance department as it affects both topline and bottomline for the merged or acquired entity,” said Mr Dasgupta.
The panelist agreed to this fact that the growth plan is not the only concern rather faster growth plan is becoming more challenging task. “If you have not charted out your growth plan then you enter into a plateau zone and thereafter decline starts. It is also necessary because we don’t know the industry which we represent will exist or be relevant anymore after 100-200 years. Technology is changing very fast and the things which surround us will become redundant in due course of time,” said Mr Angara of Vodafone.
However, Mr Dasgupta of Wipro took a different stance, “An organization is not for today or tomorrow. A listed organization has several responsibilities to deliver but to do this the organization has to have long term planning.” He substantiated his statement by citing examples of Kodak as how an inventor of digital camera has been outdone by the competitors in the same business which was a formidable organization about a decade ago.
Both speakers dismissed the over-valuation issues being a cause of concern for the acquiring companies by citing examples of Vodafone who sold 10% stake with no management control in Bharti to two-third stake and management control of Hutchinson-Essar. The panelists were of the opinion that the price rationalization is difficult in the market because of high competition and fewer choices for the organization who are scouting to acquire others.