Corporate weddings

The air is thick with reports of corporate buyouts and acquisitions. Not a day goes by without news of an Indian company acquiring the ass...

The air is thick with reports of corporate buyouts and acquisitions. Not a day goes by without news of an Indian company acquiring the assets or a piece of territory or a group of loyal consumers or even ideas from another.

December has seen a record number of such deals. They are all happy signs of corporates on the move after three long soporific years when the only sounds to emerge were those associated with restructuring and downsizing. It feels now as though there is a new spirit on the march. There is more confidence and more willingness to change. There is also a kind of audaciousness that has not been seen in a long time. Although several recent deals have been remarkable for one reason or another, perhaps the one that stunned the market most simply because it took place at all was the Tata8217;s sale of seven per cent of its stake in Associated Cement Companies Ltd to Gujarat Ambuja Cements Ltd.

Not the least striking feature of the deal was the Tatas8217; readiness to divest themselves of a controllingstake in a company they have managed for decades. There was also the speed with which Gujarat Ambuja moved to clinch it on top of the one a week earlier to acquire DLF Cements. Speed was of the essence to snatch both prizes from under the nose of the French giant Lafarge whose technical and financial strengths once it establishes itself in the Indian market would be quite considerable. The ACC-Gujarat Ambuja deal is an odd sort of union but a marriage all right of two major cement rivals. No one would have dreamt it was possible even a year ago. Mere additions to size and weight do not make sense. On the cards is rationalisation of the two organisations with the aim of integrating functions, cutting costs and increasing productivity. Eventually there may perhaps be a merger to consolidate their position in the market.

It has come to be expected the infotech sector will surprise. But when Satyam Computers bought IndiaWorld it also woke a lot of other corporates to the fact that opportunities are strewnaround, so to speak, and only waiting for someone to spot and seize them. Acquisition is the route not only to expanding or strengthening an existing area of business, it is how some houses have chosen to arrive in new fields. Aditya Birla8217;s acquisitions in cement and the IT industry and most recently the garments section of Madura Coats is an example of an old corporate house displaying new vigour.

There have been acquisitions in telecom Hutchison, banking ICICI and consumer products Hindustan Lever to name some other recent deals; others are in the making. Is it all one-way traffic to bigger corporations? Is bigger more successful? Initial market reaction has on the whole been positive with a few exceptions but for different reasons. Some like Gujarat Ambuja are rewarded for fending off threats to their positions; others like Satyam for promptly expanding their businesses. Taken as a whole the deal-making is welcome evidence of the revival of corporate energy and confidence.