India M&A: how to handle the aftermath of an outbound acquisition

Author: Ashley Lee | Published: 9 Jul 2012
Email a friend

Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

The post-closing period of an outbound acquisition was mentioned throughout IFLR’s India Outbound Investment Forum. Here’s how practitioners recommend handling integration.

Integrating a foreign company is difficult regardless of the jurisdiction. Jai Pathak, partner at Gibson Dunn said implementing overseas acquisitions was the easy part. "The real challenge comes in the aftermath: the post-closing issues, integration issues, synergistic issues and local compliance issues," he said.

To ease the transition, Wilton Henriques, executive vice president and global head of legal, governance and risk at Crompton Greaves, recommended that in-house counsel consider. "Perhaps too much time is spent on legal, tax and financial due diligence, and too little time is spent determining how to extract value from the target," he said. "The moment you shift your eyesight to value extraction, this could overshadow other interests."

Rather than focusing on due diligence, Henriques advocated a more commercial approach. He suggested looking at margins, cash flows and where and how the target’s portfolio will deliver value. "Look where it is possible to enhance productivity through labour and plant efficiencies," he said.

But that does not mean that due diligence is unimportant. Pathak believed due diligence was absolutely critical. But he warned there were challenges faced when carrying it out. "The rest of acquisition issues flow from due diligence," said.

Focusing on labour issues, Vijaya Sampath, ombudsman of Indian conglomerate Bharti Group and senior partner at Lakshmikumaran & Sridharan, said it was about managing differences. She said that it was important to define objectives clearly before a company goes into a deal, and at that time it will understand if it needs to send anyone after the acquisition. She emphasised that it is very important to give a clear message to the existing management on future plans.

Sampath also advocated adapting to local conditions. She recommended having an overall framework for compliance, processes and systems, but to be clear that it is necessary to adapt to each country depending on local laws and regulations.

More from IFLR’s India Outbound Investment Forum:

Indian natural resources M&A: what lawyers want to see

How Indian corporates can benefit from the euro crisis