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Tuesday, Dec 27, 2005


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Corporate - Mergers & Acquisitions

Overseas acquisitions set to top $4.5 b in 2005 — `Number of enquiries for due diligence has increased significantly'

Neha Kaushik

The average size of overseas acquisitions is only about $30-40 million, with many small and medium size companies seeking to expand abroad

New Delhi , Dec. 26

THE Indian MNC is finally emerging. With overseas acquisitions set to top $4.5 billion in 2005, more and more Indian companies are stepping beyond Indian shores to expand their businesses than ever before.

This is a significant increase over the previous year's level of about $2 billion, and with many Indian firms readying their war chests for expanding their overseas businesses, the figure is set to go up significantly in the coming years.

In fact, 2005 has already seen 90-plus acquisitions by Indian companies, with Europe seeing the most activity. Mr Harish H.V., Head of Mergers and Acquisitions at Grant Thornton, said, "This trend is certainly going to grow. The number of enquires to conduct due diligence for overseas acquisitions has increased significantly".

Major acquisitions in 2005 include Videocon's $289-million takeover of Thomson's picture tube business, pharma company Matrix's acquisition of Belgian firm Docpharma for $263 million followed by a controlling stake in Chinese company Mchem and 43 per cent stake in Swiss firm Explora. Added to this were Tata Steel's acquisition of Thai firm Cementhai Holding Co for $130 million; Apeejay Surrendra Group's purchase of the tea business of the UK-based Premier Foods for $138 million, and Tata Chemicals' purchase of controlling stake in UK-based Brunner Mond Group Ltd for about $110 million, among others.

The average size of overseas acquisitions, however, is only about $30-40 million, with many small and medium size companies seeking to expand abroad. The booming stock markets and ready access to funds through various avenues, including private equity, is certainly making it easier for Indian companies to raise funds for overseas acquisitions.

Interestingly, the big ticket deals are not being driven by the technology sector but traditional sectors such as pharmaceuticals, telecommunication, auto components and other manufacturing sectors which seek to gain ready export business through acquisitions.

"Acquisitions provide Indian companies ready access to overseas customers. Changes made in regulations pertaining to overseas investments by Indian companies has also made it easier for the companies to acquire abroad," Mr Harsh Vardhan, Vice-President & Director, Boston Consulting Group, said.

Meanwhile, market watchers point out that Europe is likely to remain a hunting ground for Indian companies in the coming year. "There are more opportunities in Europe. With the European economy growing slowly, there are more sellers and the valuations are also low," Mr Harish said.

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