VS Parthasarathy: Meet Mahindra group's M&A chief who steered all big deals from Ssangyong to CIE

Ten years, 50-plus deals — VS Parthasarathy, the Mahindra group’s M&A chief, has steered all big deals. Here’s what he has learnt about deal making.

The beginning

Our cross-border journey began in 2002-03 when we looked at Baltra Tractors, a UK-based tractor company. We realised we needed a dedicated unit inside the company to be able to help us do the deals efficiently. In 2007-08, we set up an in-house team of three people. Today that team has expanded to 15 and has done 50 deals worth over $5 billion.

We believe in partnerships

When I look back, one thing that stands out is our mindset towards executing a deal. We have never wanted to win just a deal but hearts as well. For us the hard side of deal making — valuations and structuring — has been important. But equally important is to understand what employees want, get a handle on the softer cultural side of the integration. In our first acquisition in China, the acquired company had 300 staff and we sent 13 from India. The next company we acquired in China, of the 25,000 staff, we just had 3-4 Indian employees.

West vs East

In the West, typically there is more acceptance of a hire-and-fire policy. M&As are very common. Most people in the job may have had some prior experience of a transaction. It is easier to go and spell out what you want done. Communication and articulation of your future strategy become very important. In the West, the biggest question is what value addition you would bring to the table. In Asian countries, there is lot of emphasis on the HR issues — how you will handle people and what kind of culture you will bring in. Beyond the business, this requires a lot of attention.



Changing image of India

In the 1980s, people would ask: “Do you have cows sitting in the middle of the roads?” In the 1990s questions would revolve around yoga and Vedas. A decade later, India’s IT skills and other strengths began to get recognition. Today if you ask me, there is no differentiation between India and the West. But of course there are exceptions. For example, some countries like China view the world differently. They see the world as hierarchical — as China, the US and the rest of the world. So there it takes a bit of time to handle the mindset.

The checklist

First, never go with the mindset that you are putting money on the table. You have lost even before you have started your journey. Seek a win-win partnership — it makes for a more fruitful deal. Look at every deal from two angles — the health dimension, which is taking care of the basic sustenance and bread and butter issues. And the growth dimension, which explores the upside that can be accrued. I have also learnt that never do an acquisition without a 100-day integration plan.

Building an M&A team

I strongly believe in the 1/3rd philosophy. When you build a team for an M&A, split it into three. The first team should do the transaction and walk away, the second should be there for the first 100-day integration and then move on. The last team is involved in the business. Also, our M&A team typically has two kinds of people — the process manager who knows the nuts and bolts of the deal. And the business manager who knows the nuts and bolts of the business. The two work in tandem on the deal. Talking about debt against equity, you need to strike a good balance. It is always important to keep in mind that debt is cheap, equity is costlier. So a bit of exposure to debt is good but too much of LBOs [leveraged buyouts] can be dangerous. No debt, all equity is also not good.

Learnings & reflections

When I went to China in 2005 for our first acquisition there, I identified two potential companies to acquire. But we did not have the risk appetite to acquire both the companies together. We decided to acquire the smaller one in 2005 and the bigger one later in 2007-08. In hindsight, I think if we had acquired both the companies together it would have been far better. The toughest part about the Ssangyong deal? We patiently followed the deal for two years just waiting and watching how things evolved. The wait was the toughest part of the whole deal.

(As told to Malini Goyal)