House Of TataAcquiring a Global Footprint

Making Headlines

Aug 2007, Tata acquires Corus for $ 12.1 bnLargest oversees acquisition in Indian historyCorus was 4X larger than Tata steel – leveraged buy

outFrom 56th to 6th largest steel producer in the worldBought at a premium of 33.6% at auction

The M & A fever

Did Tata group management have the mindset and bandwidth to reap the benefits of its acquisitions?

Was M&A the best route for group companies to build global businesses

Should all 96 companies in the group seek global footprints?

House of Tata

http://www.youtube.com/watch?v=rA11fVPlm3g

The TATA Empire – Largest private employer

Keeping it together

Tata sons maintain 26% equity for veto rightsBrand Equity – Pay and use – Proceeds used for

Umbrella promotionGCC & GEE to promote better strategy and

combined financial strengthReputation in the face of competitive business

environment

How the game changed1991

Critically low foreign currency assetsLiberalizationMore freedom at the price of more competition

Tata advantageForeign investors to tie up with local businessesTata was a sought after partner

1997Asian Financial CrisisPutting eggs in different baskets

M & A fever 2004 – Indian companies could invest 100% of their net

worth abroad By 2007 – bar raised to 400% Borrowing – Local and international allowed and other

financing options made available – FCCB, ADR & GDR External cash flow increased by 777% in 5 years (2000 to

2005) compared to China’s 55% In 2006,

World M&A activity – $3.8 trillion (record) India outgoing M&A - $9.9 billbion (double that of 2005 and

for the first time, more than inbound M&A)

Why sell & BuyBorn Global

Born GlobalInsignificant local demand – export to North

America & EuropeDelivery centres in India, Brazil, Australia, China,

Hungary, Japan, Mexico & UruguayBy 2007, 91% of revenues from overseasM&A for building technological capabilities and to

capture new markets through building internal staff capability

Entered European market in 1990’sIncurred significant lossesBetter results in Middle east

NRIs were major consumers

Can M&A be used for consumer goods or only for B2B???

Initially acquired properties in London and New York

Disinvested to maintain minority stake – longer chain of hotels

Emphasis on gateway citiesPotential customer for Indian propertiesFinding the right chain