The different ways of acquiring a company
India Inc should be at the forefront of any M&A action, given that the concept was dealt with in great detail in our ancient texts. Gainers & Losers
By Radhakrishnan Pillai, |
Mergers and acquisitions (M&As) are key strategies for almost all top corporations today, especially our desi ones. Indeed, India Inc should be at the forefront of any M&A action, given that the concept was dealt with in great detail in our ancient texts.
Kautilya's Arthashastra even defines the ways of acquiring a firm: "Acquisition is of three kinds; new, formerly possessed and inherited" (13.5.2). But Chanakya also made it clear that acquisition is not just mere killing and conquering. Rather, it's a well-thought strategy which strives for the betterment of both the parties involved.
So M&As, in addition to material benefits, M&As should look out for people too. If this is understood, all such processes will automatically be successful, whatever category they belong to:
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TAKING OVER A NEW FIRM
In olden days, kings used to go and win over new territories all the time. But they needed to do a lot of study and research for this as not many knew about a strange new place.
Even today, the first step in acquiring a firm is to research it in detail. This study is usually the part of a 'strategic planning team'. Due diligence and meetings can follow only after the identified company is studied deeply.
TAKING OVER AN EXISTING FIRM
More often than not, regions that were under a particular king's control got lost to another one. This can be due to bad management or lack of attention.
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This happens in the corporate world too. When companies grow, they lose focus on their small businesses. By the time they become aware, they find that the ownership is under threat. So the next type of acquisition is to conquer firms formerly possessed.
TAKING OVER AN INHERITANCE
A prince may have inherited a kingdom. But in due course of time, it may have been taken away from him, possibly by his own 'trusted' ministers. So when the prince matures and wants control of his inherited share, he may have to fight it out. This is acquisition of inherited property.
All those court cases you see for ownership of a small property or firm denotes this situation perfectly. Fighting back is the only way to get back what one inherited but lost.
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Whatever be the type of acquisition, having a strategic plan is a must. And more importantly than that is to provide for people on both sides of the negotiation table.
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