Tomorrow, the World

How Indian companies are changing the character of cross-border M&A.

Editor’s Note:
This article, published in the December 2007 issue of CFO Asia magazine, incorrectly stated that Dr. Reddy’s, the Indian pharmaceutical company, set up an institute in Germany to educate children about the dangers of drug addiction. In fact, the institute was established by Betapharm, a German drug maker, before Dr. Reddy’s acquired that company in 2006. We apologize for the error.

There are no second acts in American life,
F. Scott Fitzgerald sadly pronounced. But the
American novelist’s observation doesn’t
apply to Indians journeying to the United States to
reignite faded glory.

In February 2007, Sanjay
Dalmia walked to a rostrum at the New Jersey
offices of a troubled US textile company. He had
just bought Best Manufacturing, a supplier to
hotels and hospitals, for US$35 million,
one of a chain of recent acquisitions that he is
seeking to stitch together as an integrated global
business, using America as a springboard.

“We’re here to build a business, not destroy one,” he told the
managers of Best, rallying them with a spirited call in support of
free enterprise. The scene was incongruous. Dalmia, 63, has
shoulder-length gray hair and a patrician face. In his lilting Indian
accent, he addressed a roomful of skeptical managers in the
state whose most famous fictional son is Tony Soprano. “If we
cannot bring this concept of free enterprise to the global market
from America,” he said, “then some other enterprising part of the
world will rightfully do so.”

The irony, of course, is that this is exactly what Dalmia and
his Indian company were doing. He hails from the family that
financed Mahatma Gandhi’s audacious bid to toss the British
from the subcontinent. They made their money in cement in the
early 20th century, but over the years the family fortune fell on
hard times. Sanjay devoted his life to politics and charity, but
tired of this and turned to running the coterie of businesses that
were left to him. Observing the globalizing success of Infosys,
the BPO provider, and Dr. Reddy’s, the pharmaceutical company,
he thought, “Why not my businesses, too?”

Three years and several acquisitions later — in the United
States, Romania, and the UK — he found himself in Roswell using
words similar to those Bill Clinton used to tout the North American
Free Trade Agreement in 1992.

Unbounded Confidence

A surge of cross-border M&A confidence is running through Indian
businesses and it has intoxicated managers across a whole range
of companies. “There’s a sense in Indian companies now that they
can buy assets overseas and deliver value,” says Sumant Sinha, president
of Aditya Birla Retail, and former CFO of the Aditya Birla
Group. “It’s happening in firms of all sizes.”

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