Business Briefing 21/11

Pragmatic Indian firms are now scouting for cheaper overseas M&A deals; and a book on how Internet giants made it without a marketing force

After a spate of seductive multi-billion dollar overseas acquisitions in 2007 and 2008, which appear to have produced mixed results, India Inc is discovering the virtues of taking small measured steps. Wiser from watching the Tata Group and AV Birla firms struggling to make mega mergers work, others are now looking for acquisition targets that are smaller (sub-$100-million). They are also more judicious about valuations and the strategic fit. Ergo, Infosys’ $58 million buy of Atlanta-based outsourcing outfit McCamish Systems is just a drop in the ocean for a company of Infy’s size, but it signals the company’s intent to steadily beef up its much-neglected BPO business. South Indian sugar firm Shree Renuka spent $82 million to acquire Vale Do Ivai, a Brazilian company that  gives it two sugar and ethanol production facilities, and a combined cane crushing capacity of 3.1 million tonnes per annum. Wipro too added more muscle to its consumer products business by acquiring cosmetics maker Yardley’s fast-growing businesses in Asia-Pacific and North Africa for $45 million. “The last two years witnessed several larger than life deals where Indian companies shunned their usual conservative approach and paid several times more than the annual revenues of their overseas targets. With the global business environment turning on its head, all of them realised that even maintaining acquisitions like Jaguar-Land Rover and Novelis is extremely difficult. Now, people are wiser. It’s a good time to buy and banks are willing to fund M&As, but only the smaller deals,” says CG Srividya, partner, Grant Thornton India. Small, in these troubled times, is indeed big.

How did gennext internet companies such as Google, Facebook, eBay and Flickr become astoundingly successful in a matter of a few years, with no advertising, marketing or even a sales force? The simple answer according to Adam Penenberg, an acclaimed investigative journalist, is word-of-mouth. In his brilliant new book Viral Loop-The Power of Pass-It-On (Hachette, Rs 350), he argues that simply by designing your product the right way, you can build a flourishing business that grows exponentially because customers spread the word. Almost every page of this book has a business idea. And even if you aren’t an entrepreneur, pick up Viral Loop. It might out-virus Seth Godin.

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