In the world of fiercely fought corporate takeovers, it is rare to hear words such as pyaar (love) and dil (heart) being used by a bidder and aimed at the target company for acquisition. That’s what makes the ongoing battle for control of the Bengaluru-based mid-size software services firm, Mindtree, which is facing a threat of a takeover by one of India’s engineering conglomerates, L&T, a unique case in this country’s relatively brief history of such acquisitions. L&T, which bought 20.4 per cent of the stake held by VG Siddhartha, the single largest shareholder of Mindtree, when he sought to exit the company after staying invested for two decades, has made an open offer to bump up its shareholding to well over 51 per cent — offering Rs 981 a share to the software firm’s shareholders. The original promoters of Mindtree are fiercely resisting L&T’s unsolicited offer, terming it as a hostile bid and posing questions to the bidder including whether it could build a great technology business without destroying another firm.
That the attempt to acquire the company has become an emotional issue for the software services firm is clear from the fact that one of its founders, Subroto Bagchi, has said that Mindtree has not been designed as an asset to be bought or sold and that it is a national resource with an unique culture. Mindtree’s promoters now plan to ward off the attack by offering a buy-back of shares. Unlike some of the takeover battles of the past, this one is different. There is no foreign predator involved, nor is the potential acquirer in a business that is completely alien to that of the target firm. Indeed, it could be argued that there are some synergies in terms of both being professionally managed enterprises without the overhang of any family groupings.
Takeovers, even if hostile, can be value accretive for shareholders as they have the potential to lead to greater efficiencies and scale and can shake up complacent managements. To that extent, such attempts should be welcome as long as there is no asset stripping and the bidder’s interest is not transient. It is true that new age firms with a dispersed shareholding face the threat of a takeover but ultimately, the best shield for them and in this case, Mindtree, are the company’s shareholders. The emotional appeal by the original promoters may be in order, but it is important that they too recognise that having chosen to publicly list their firm, it is for the shareholders to take a hard look at the financial metrics of both the acquirer and the incumbent, the cultural fit and prospects, and decide whose offer is to be welcomed.