Earlier I wrote about the Tata-Corus deal. Today let’s analyze the reasons behind the acquisition trend. A study conducted by Wharton School of Business points to a combination of factors-means, motive, confidence and opportunity.
Six-Sigma’s behind the acquisition trend
- Outsourcing : The outsourcing phenomenon, in which the western firms hired Indian companies for various call center and other work, has benefited the Indian managers the most. They not only became familiar with the western management practices but got the confidence that they can deal at a global level. It also demonstrated that India is a reliable source of low-price yet high-quality products and services.
- Capital inflow : With Indian economy booming, there is a large capital inflow in the market. Plus the Indian firms have become profitable.Most of them are underleveraged i.e. they have not much debt on them.Their ability to borrow money from market is very high.
- Risk-taking abilities improved : The corporates in India are now willing to take more risks unlike their predecessors. They now have the confidence that they can make it BIG!
- Government support : Regulatory changes made by the government are showing the results now. Recently Govt has announced that Indian firms can now raise money upto 200% of their capital value from external markets. (This liberalization era started way back in 1991 when Mr. Manmohan Singh was the Finance Minister)
- Pride factor : This is an equally important factor involved. (Every Indian knows what pride factor is during the India-Pakistan cricket match)
- Familiarity with western markets : Now the Indian firms know how the Western markets operate.Even the foreign investors now show faith in Indian management.
All these things have certainly fueled more confidence in the India Inc and now it’s ready to take on the world.