Monday,
December 2, 2002
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Feature |
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Mergers and acquisitions
may be the way out
Imran Qureshi
MERGERS
and acquisitions, or M&A, could become the way out for several
mid-sized and small companies as the clones of the biggies get clobbered
in a possible shakeout in India’s IT industry.
Mascot Systems’ planned
acquisition of US-based eJiva and Hyderabad-based Aqua Regia to drive
business growth is being seen in industry circles as a logical step
towards meeting the demands of the uncertain global business
environment.
The upswing in the
fortunes of the biggies like Wipro and Infosys — dramatically raising
the graphs at stock exchanges — and the unlisted but biggest of them
all TCS has not meant only crumbs for the mid-sized and small but
focused, differentiated and experienced companies with domain expertise.
But to survive comfortably
in the global market of uncertainty, top executives of mid-sized and
small companies have begun serious discussions on assessing each other’s
strengths and weaknesses, including the tricky issue of valuation, for
mergers and acquisitions.
"You will find a lot
of interesting combinations happening in the next six months. Customers
are not going to give business because of cost or range of services.
They are looking at focused companies because they want to play it as
safe as possible in the current environment," Anand Sudarshan, CEO
of Planetasia, Microland group, told IANS.
"There is a 180
degree change in attitude. Customers are looking at long-term
relationships. So the question is: Can the other guy meet our
requirements for more than a couple of years?" says B. Ramaswamy of
Sonata Software.
"Basically, customers
are looking for a comfort level like how many persons can this company
throw at the problem. It is the quality of the persons that determines
their outsourcing relationship," adds V. Ravichandar, MD, Feedback
Services.
"The current
situation only means that the small ones are getting clobbered and a
shakeout is going to happen sooner than expected. The synergies and the
horizontal breadth of services on offer are what the customer is looking
at now."
Adds Ananth Koppar, CEO,
Kshema Technologies: "The boutique companies will slowly start
dying, though none have died yet. But the fact is that many are reducing
their numbers drastically, some from 100 to 50. The clones of the big
ones will not survive."
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