Moneycontrol » News » Management

The Future of M&A

Published on Wed, Mar 10, 2010 at 15:07 | Source : Moneycontrol.com

Updated at Fri, Mar 12, 2010 at 13:00

Like this story, share it with millions of investors on M3

Share on Tumblr

Some of the finest mergers & acquisition (M&A) lawyers and bankers in the country are here on the occasion of the IBA-M&A conference in Mumbai. Adam Emmerich, Partner, Wachtell; Peter King, Partner, Weil, Gotshal & Manges; Christopher Saul, Partner, Slaughter & May; Cyril Shroff, Managing Partner, Amarchand Mangaldas; Raj Balakrishnan, MD-M&A, DSP Merrill Lynch; Amrit Singh, MD & Head-M&A, Deutsche Equities India. CNBC-TV18's Menaka Doshi quizzes them about what exactly the next few years would bring in terms of M&A activity, the regulatory changes, the financing changes and what the key drivers of M&A will be over the course of the next few years.

Here is a verbatim transcript. Also watch the accompanying video

Q: Are the key drivers this time around going to be different from any other time around if I can put it that way?

Emmerich: I think that the big difference we will see in the coming years as opposed to say the peak years of '06 and '07 is tremendously less financially driven M&A whether it was outbound and the Indian M&A that was driven by cheap debt finance or whether it was leveraged buyout (LBO) transactions in the states of Europe, I think we will see much more strategic M&A consolidation, access to markets and much less M&A driven simply by the presence of loads of money free for the asking.

Q: Do you have a view that is different from that?

King: No, I don't. I agree with that. I do think that there is another issue that is going to be different this time which is that we will see more M&A driven by financial distress particularly assets coming out of bankruptcies being acquired and people take advantage of deceived lower prices in a financially distressed environment. We have seen some of that already and I personally think there is more to come.

Q: There is more to come despite the fact that we could be possibly on a recovery path?

King: Despite the potential recovery, there is still a large number of companies certainly in the European environment with refinancing issues going forward two-three years from now and we expect to see more activity as a result of that.

Q: What kind of companies can avail of the opportunity to buy distressed assets, how complicated are some of these deals, do you think that they apply to Indian companies, let me put it in the context of one of the largest potential deals that we have been talking about in the media for a last few weeks, India's largest company Reliance has put in a bid apparently for LyondellBasell which is the large petrochemicals company which is in the process of chapter XI bankruptcy, do you see many of these opportunities available especially for emerging market companies?

Saul: We do see these opportunities as Mr King says there is increasing financial distress and at buyer's perspective it shouldn't be too worrisome in fact you are buying assets - what you don't get is much protection from the seller, traditional buyers will say we would like lots of warranties and indemnities please, not available. So that puts a big emphasis on due diligence so you have to know your asset and know the problems and also you have to make sure that you have got your financing set up and you can move swiftly. So I think careful due diligence and clean financing is going to be the critical issue otherwise I think distressed assets make a very attractive possibility and we have seen that a lot in Europe.
Shroff: Another interesting dimension that maybe emerging and I am not sure whether it is a trend or not, is different internal dynamics in a number of co-operations themselves. So firstly they are seeing this mismatch between the sort of psychology in India, China versus the West and a lot of internal dynamics playing out in many Indian corporates where they may either be willing to shed and therefore be on the sell side as well as maybe consolidate in a particular silos and look outside because getting any Greenfield expansion done over here might be far more difficult but it is not a trend yet but there are couple of situations where I am seeing that and maybe it might become a stronger trend as the year progress.