The Indians are Coming

The news caught everyone by surprise. Indian company Videocon sending an “expression of interest” to acquire the mobile phone division of Motorola, the American icon that invented the cell phone.

This spree of acquisition activity is a growing trend as India has gone from the exotic in the 1980s to an imperative in the 21st century. Indian business, like Lord Vishnu, has taken on new avatars—the role of an acquirer of high-profile (although at times inefficient) assets is the latest one.

But, questions need to be asked—how will the Indian companies adapt to accommodate their international assets? How sustainable is this initiative by Indian companies—after all, acquiring and running assets profitably across the world is a major undertaking?

The Videocon interest in Motorola’s mobile phone division was preceded by Tata’s acquisition of Jaguar and Land Rover. And as I write this column, there is yet another marriage that is consummating, that of India based Religare acquiring Hichens Harrison & Company, a British financial services company founded in 1803.

It started with the Wipros and the Infosys who were the early ones to arrive on the cross-border acquisition stage. But, they were acquiring in a sector familiar to them and with an intent to expand their global footprint. The acquisition of a Novelis by Birla’s Hindalco and of Corus by the Tatas was noteworthy and seemed a natural move to gain further efficiencies in an industrial sector they had operated in for decades.

It should be said that this acquisition activity has not always been in relatively staid areas such as steel and aluminum. The acquisition of a Boston landmark hotel by the Taj group was one such interesting buy. Who would have imagined that one would be able to sit in relative peace and sip tea in this historical, now Indian owned dwelling only minutes away from where the Revolutionists sunk bags of tea in Boston Harbor.

It has taken time to get to this. Over the last two decades, the industry of Indian business coupled with government policies has created a platform conducive to buying assets abroad. Flush with cash from operations and with access to capital from public markets, Indian companies are actively seeking targets as a way to expand.

At the end of 2006, Accenture published a report titled “India goes global: How cross border acquisitions are powering growth.” They estimated that in the first 10 months of 2006 cross-border acquisitions exceeded $23 billion. Going from 40 major acquisitions in 2002 they predicted more than 180 by the end of 2006. What’s even more interesting is that 10-year data show the acquisition targets almost evenly spread across North America, Europe and Asia.

The milestone here is definitely that “Indian companies are acquiring.” But, closer look diverts attention to the nature of the Indian companies that are being acquisitive, and then to their grander ambitions of going after iconic entities.

The profile of the Indian acquirer, to say the least, is different from what the world has been used to. The Indian acquirer at once looks like a South Korean Cheabol (the large, family owned conglomerates), and a conventional western company due to its independence from the government and increasingly western management style.

Some of the Indian acquirers look like a potpourri of family owned companies. Let’s accept it, few can comprehend the various operations of the Tatas or the Birlas. And, it took a break-up of the Ambani brothers to bring more transparency across their businesses. The aforementioned acquirer Religare, is a financial services arm of Ranbaxy, known for its healthcare presence.

The contemporary Indian companies, those in the technology arena, who focused on acquiring in related sectors to drive synergies is understandable. However, the broadly diversified, family owned businesses who bring tea to our morning cups as well as now provide conveyance are the ones that are enigmatic.

At the group level, these Indian conglomerates defy conventional business wisdom of leading through specialization. In the past, when there were limits to progressing in a given sector within India, it made sense to diversify to grow group assets. Now, how each stream of business withstands a globally competitive market while priorities get arbitrated at a group level is an area that will be, to say the least, interesting to watch.

In the short term, there is a larger issue—a cultural one. Although, the world has worked for the Indians in various settings over the past decades, this trend of the Indian company as the owner is a different one.

There is apprehension and wonderment on what culture and values will Indian owned companies bring? All you know, you may end up working for a company where a majority of the shareholders, sitting 8,000 miles away in India, will steer with their insights and sensitivities, as would be expected. What implication will this have? The answer is difficult to speculate.

This issue is not trivial and cannot be waved off lightly as “give them some credit, they know what they are doing.” Acquisitions, after all, remain a complex undertaking and no company worth its humility ever claims mastering it. Couple that with the perception that is created by a new, relatively unknown foreign player in international markets.

The Japanese lived through this experience in the 80s when they faced an onslaught of harsh skepticism in the US, to put it kindly. But, they hunkered down and focused on quality and lower priced products, thus steering over the anti-Japan bumps that confronted them. Today, few think twice of working for a Toyota or a Honda, let alone buying one. These companies have created an environment that is less foreign for foreign workers, while still maintaining their cultural nuances that sets them apart.

The amorphous nomenclature “India Inc.” or the “India brand” that is propagated effectively by the Indian press is worth a reflection here. India Inc. as a destination to outsource development was one thing, India Inc. as the owner of international assets is another. The latter elevates the challenge of creating a norm that is seen by the world as good for business, good for local communities and culturally, to an extent, homogenous.

The Indian is not new to international occupations. The Indian as the indentured worker of the 19th century or the technical professional of the 20th century has long been recognized for his hard work and skill. T.S. Eliot’s poem “To the Indians who died in Africa,” provides a timeless tribute,“This was not your land, or ours: but a village in the Midlands, 
And one in the Five Rivers, may have the same graveyard. 
Let those who go home tell the same story of you: 
Of action with a common purpose, action.”

The Indian as the capitalist or as the acquirer is a new concept for the world. In the history of man, the Indian, unlike the Greeks and the Romans, did not travel foreign lands with an aim to plunder or occupy. He ploughed, he built and he traded off of the harbors of the peninsula.

Thus, this latest avatar of a modern day “Indian Alexander” is, on a lighter note, titillating to the mind but introspecting thereafter.

This newest form brings great challenges and with it responsibilities. The new breed of acquirers would be wise to follow the theme created by contemporary Indian companies of the technology sector—providing greater transparency, maintaining highest standards of ethics, and a cultural sensitivity that will be endearing to the world.

That said, as we look ahead, there is reason for optimism. The Indian, after all, has risen due to his [and increasingly her] hard work, flexibility and most importantly in his pursuit of the self good—key ingredients for success in the intertwining borderless world.