Monday, March 04, 2013

‘‘Indian companies take over foreign companies for very different reasons than do companies in developed” economies

Robert Schipper, Executive Director, Netherlands Foreign Investment Agency talks to deepak ranjan patra about how the Dutch changed the rules of the economic engine

B&E: Despite the economic crisis, foreign investment in the Netherlands increased in 2009...
Robert Schipper (RS): Trade and foreign direct investment have not only driven our economy in the past but have now also proven to be the way out of the financial crisis for the Dutch economy. Foreign companies and international trade take care of an important part of our economic growth: 4% of our companies are foreign-owned, these foreign-owned companies generate 15% of employment in the Netherlands, they generate 24% of the added value and contribute 30% to the total turnover! The slowdown has proven to be a good time for many strategic investments for foreign companies that have maintained steady balance sheets during the crisis by giving them a cost advantage and the opportunity to seize future markets with recovery on the anvil.

B&E: Considering the fact that conditions in Europe have deteriorated further as compared to 2009, do you think it’s a right time for Indian companies to foray into the European market?
RS: While the general investment mood anywhere in the world today is cautious, we have seen a steady rise in the risk appetite of Indian companies towards M&A activity. There has been a distinct change in the outlook of India-based companies that are now truly looking at a global playing field rather than considering the United States as the primary market. With more experience in overseas M&A markets and largely successful attempts to integrate overseas acquisitions into their businesses, Indian companies are more open to exploring Europe this year. The recent announcement by Infosys on realigning their market focus to increase activity in Europe is indicative of this mood. In my view, Indian companies will specifically eye distressed assets and niche technology and design centres in sectors like oil and gas, metals and minerals, technology and telecom. With European markets experiencing further consolidation, Indian companies would have opportunities for strategic acquisitions in EU countries.

B&E: What is your outlook for Europe, especially for the major economies like the UK, France, Germany, Italy and Netherlands?
RS: The countries of northwestern Europe – UK, France, Germany, the Benelux and Scandinavian especially – are completely sound and entering a period of steady economic recovery. As the world market picks up, these nations will naturally benefit from growth in world trade.

B&E: Do you think M&As could play a major role this year in shaping out the global business environment for the days to come?
RS: As the economic recovery continues, companies in many industries will use mergers and acquisitions (M&As) to help drive revenue growth and bottom-line performance. With a rebound in global markets, Indian companies are also back with an appetite to go for ambitious overseas acquisitions. However, Indian companies take over foreign companies for very different reasons from companies in developed economies. It’s not simply about growth and consolidation. Indian companies acquire international companies to gain market access, to access technology and gain new capabilities as part of a global expansion strategy.

Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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