India Inc. is increasingly looking overseas for growth. While Europe is reeling from recession, opportunities abound for acquisitions in this vulnerable market. Although a bit slower than before, India has enjoyed a period of continuous economic growth and the companies now flush with cash are finding fewer avenues for investments back home.
Investing overseas provides a direct entry into these markets through existing clientele and a local work-force. And while struggling to stay afloat, European companies are shedding previous vacillations about being acquired by foreign companies.
Recently, on the outsourcing front, Indian IT titans like Wipro, Tata Consultancy Services, Infosys and HCL Technologies are in the finishing stages of deals worth altogether $250 million (Rs.1,359 crores) in France and Germany. The sources did not name the particular acquirer or target as they are advisers to the deals and are bound by non-disclosure agreements. France and Germany make up the bulk of the European IT services market with combined turnover of 155 billion Euros according to European Information Technology Observatory.
The major competitions here for the Indians are local service providers such as T-Systems of Germany, Atos and Capgemini of France and Tieto Oyj of Finland as well as international players like IBM, HP and Accenture.
Last month, Mumbai-based Geometric acquired German company 3Cap Technologies GmbH for about $15 million and before that, Cognizant Technology Solutions acquired six companies from Germany’s C1 Group, and in September, Infosys bought the Swiss consulting company Lodestone.
The bulk of outsourcing deals from Europe comes from the United Kingdom and the Nordic region, and Europe is anticipated to contribute a little under 30 percent of the US$76 billion in exports the Indian IT-BPO industry is expected to generate in the year ending March 2013, according to Economic Times.
Indian companies (listed and unlisted) announced 1,995 overseas acquisitions from CY 2000 to CY 2012, involving an investment of nearly $116 billion, as per data sourced from Bloomberg
The biggest of all acquisitions is Tata Steel acquiring Anglo-Dutch firm Corus Group in 2006 to create the fifth largest steel company of the world. The deal was worth $7.6 billion (Rs.36,650 crores). Tata also acquired automobile manufacturers Jaguar and Land Rover, in a $2.3 billion deal.
Other major deals include Aditya Birla Group’s Hindalco Industries acquiring the Canada based firm Novalis in an all-cash transaction for $6 billion. Bennett Coleman & Co, India’s largest media group bought Virgin Radio in a $53.2 million deal with SMG Plc. in 2008 and Oil and Natural Gas Corp (ONGC) took control of Imperial Energy Plc. for $1.9 billion in early 2009.
India and other emerging economies are globalizing their businesses. And if the recession continues to persist in developed economies, the balance of trade might very well shift in their favor. Besides controlling manufacturing and services industries and having favorable population trajectories and high growth, these economies have begun eyeing key research and development facilities. These hubs of innovations have made the western developed economies, the power houses they are today.