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Global M&A activity holds lessons for Indian space

Nilanjan Dey

Taken-over companies are adding value to operations


Current scenario
ING and Principal have taken over competing outfits
Principal had expressed an interest in emerging pensions setting in India
Indian market for MFs is not new to M&As

Kolkata , Aug. 18

The M&A activity involving international asset management players is a scenario that should help Indian mutual fund industry, say those connected with the industry. It would now be possible to source management inputs and build up expertise.

Investment management businesses run by the likes of ING and Principal have in recent times taken over competing outfits, a trend that has not been overlooked by local players. In fact, it has become a talking point in the higher echelons of the industry.

The companies taken over are said to be adding value to the operations sustained by the larger players, many of which are among the dominant names in key global markets.

Indian perspective

Among the recent deals is one done by European major ING, which runs a fund outfit in India with an AUM of barely Rs 5,000 crore. However, Mr Vikaas Sachdeva, Country Head - Business Development, ING Vysya MF, points out that the deal (a Euro 68 million buy-out of ABN AMRO's fund business in Taiwan) has made sense on several fronts.

"This will boost ING's ranking in the Taiwanese market and add to its assets base there. Here in this country, we are not talking about acquisitions but I can tell you that we are looking at certain other developments that have been concerning ING internationally. We are, for instance, a big name in real estate, which has a potential in India. Issues such as these may be tracked from an Indian perspective," he said.

In another development, the Principal Financial group of the US has announced the acquisition of WM Advisors from Washington Mutual, a step that is said to reinforce its plan to capture a larger share of the individual retirement assets market.

"While such developments may be happening all the time internationally, we will have to see whether there are lessons for India," observed Mr Rajan Krishnan, who heads Principal's asset management business here, in an indirect reference to the move.

Not new to M&As

Principal, it may be mentioned, has a major presence in the US 401(k) arena and has earlier expressed an interest in the emerging pensions scenario in India.

Incidentally, individual retirement assets in its parent country are predicted to increase by $3 trillion or over 50 per cent by 2008 or so.

It may be mentioned here that the Indian market for MFs is not new to M&As. A number of deals have taken place in the past decade, some of them involving heavy-duty names like Kothari Pioneer MF (taken over by Franklin Templeton), ITC Threadneedle/Zurich (HDFC) and Alliance (Birla Sun Life).

Among the less high-profile cases are Jardine/Sun F&C (Principal), IL&FS (UTI) and GIC (Canbank) and Indbank (Tata). A few overseas players — like TD Waterhouse, Cazenove and Newton — have otherwise moved out of JVs with Tata, Chola and Sundaram.

The last two have since entered into fresh tie-ups with DBS and BNP Paribas, respectively.

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