The Hindu : Business : Indian industry optimistic about M&A deals

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Wednesday, Jun 06, 2007
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Indian industry optimistic about M&A deals

Special Correspondent

Respondents feel that the deals were overvalued, says survey

NEW DELHI: The Indian industry is still game for global merger and acquisition (M&A) deals even as a majority of the top corporate honchos are of the view that they are paying much more than the actual value of the companies targeted.

According to a survey by global research and analysis firm Evalueserve, even though there is near unanimity among corporates and analysts that aggressive buy-out deals are essential for growth and geographical expansion, 56 per cent of the 100 top executives surveyed feel that the acquiring companies are shelling out more than the true value for their acquisitions. "Most executives feel that the acquisition trends reflect India Inc.'s global leadership aspirations and that M&A is an integral part of the companies' globalisation strategies."

Conducted by Greenfield Online for Evalueserve, the survey pointed out that 56 per cent of the respondents felt that the deals were overvalued. Of the balance, while 22 respondents said the companies were not overpaying for their acquisitions, the other 22 per cent were not sure enough to give a view.

Most of the respondents, however, admitted that given their strategic aspirations, the acquirers were correct in moving aggressively on these buy-outs.

This was because companies had hardly any choice but to pay more than the `true value' in a highly competitive atmosphere in the hope that they would be able to over-achieve on value realisation.

Growth indicators

Such M&A activities are also being interpreted as indicators of the Indian growth story which tend to boost market sentiment.

In fact, over 60 per cent of the respondents felt that the M&A deals demonstrated a high growth phase in the Indian economy.

The report pointed out that many analysts expressed concern over the rationale behind the huge deal size of Tata Steel's acquisition of Anglo-Dutch steelmaker Corus earlier this year, noting that the buy-out price was "unreasonable and inflated".

However, the fact remained that the deal catapulted Tata Steel from 56th to sixth position in global steel ranking in terms of annual steel output.

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