Rules of M&A Game

I am regularly watching Rules of M & A Game from last few weeks on CNBC. Its scheduled time is 9.30 pm Sunday.

Yesterday Arun Gandhi (ED Tata Sons) was in the HOT seat. He explained the various scenarios wherein they have done the acquisitions in the recent past, the most interesting being Corus deal.

Out of the entire discussion on Corus here are few points which I find more interesting from Business point of view:

- In October 2006 there were media rumors going on in UK that Tatas are interested in Corus because of which share price of Corus was fluctuating heavily in UK stock market. As per the UK takeover code rules and regulations in such scenarios the acquiring company has to make statement clarifying its stand that whether it is really interested in the target company or not. If the statement is “not delivered” then it would be deemed as if Tatas are trying to create favorable market for Corus based on false rumors and the company may have to suffer legal penalties.
And if the acquiring company makes a statement that it is not interested in the deal at this particular moment then it is not allowed to show any kind of interest in the target company for next 6 months time span. So Tatas had to come up with diplomatic statement that they are looking for several options to acquire few steel sector companies world wide and Corus is definitely one of them. Had they made statement that they are not interested then they wouldn’t be allowed to show any interest for next 6 months. And at the same time few Russian steel giants were going through fund raising through IPO so the entire steel sector scenario would have been completely different than what it is today. Perhaps Russian giants would have entered into the game and could have successfully spoiled the party for Tatas. So the timing was crucial for Tatas when they came up with statement of their interest in Corus.

Why Tatas paid 608p per share?
- There were total 9 rounds of auction after CSN and Tatas entered into tussle to take over Corus. In first 8 rounds each bidder has to bid atleast 5p more than the previous bid. Corus’s bids were fluctuating heavily…like some times they were bidding too high and sometimes just 5p above Tatas. But Tatas always restricted there bidding to 5p more than what Corus was bidding. However in the last round i.e. 9th round there was no any compulsion to bid 5p more. The bidders were allowed to come up with suitable price based on their formulas. In the last round Corus bid 603p as their highest price they can offer while Tatas came up with 608p. Now the question is how Tatas come up with the figure 608p since the minimum limit of 5p was not applicable in the last 9th round.

Arun explained that the acquisition of shares under UK take over code has to go through the scheme of arrangement wherein all the significant shareholders like hedge funds…pension funds…mutual funds who have considerable holding in Corus will have to sit with Tatas and Tatas have to convince them and acquire shares from them. This entire scheme of arrangement process has to be completed within 6 weeks after the takeover bid.

Based on time value of money Tatas came up with the price 608p to ensure that the share price of Corus does not go below 603p in next 6 weeks. If it could have gone below 603p Corus could have started acquiring significant shares from the market directly and could have created problems in scheme of arrangements for Tatas. As per the UK takeover code Corus cannot acquire even a single share above its highest bid 603p. Similarly neither Tatas can acquire even a single share above its highest bid 608p. So to ensure that the share price does not go below 603p Tatas came up with this figure of 608p based on time value of money for next 6 weeks period. And Tatas acquire all the shares required right from 604p to 608p.

My IDOL...

Reliance Industries ltd. requires no introduction to market savvy people. “Reliance” a name dreamed off by dhirubhaii when he is Gujarat’s chorwad district. From the very humble beginning it has gone all the way to become largest private sector company in India….and who knows may be in world very soon (courtesy: current market rally again led by Reliance group).

RIL is like a banyan tree set up by dhirubhaii and extremely efficiently nurtured by his 2 sons…Mukesh & Anil…Mukesh quite oriented towards technicalities of business while Anil towards fundamentals of the same. Today all the branches of this tree are spreading large and long enough in terms of valuations and playing a significant role in India’s economy.

However Reliance group today has come a long way well above Ambanis. I remember somewhere I read dhirubhaii’s statement couple of years back…”one day Ambanis will become irrelevant…only the philosophy and the shareholders will keep this organisation afloat”…and this is what is happening today (and each and every day) on Dalal Street.

I read about dhirubhaii for the first time when I was in 10th std. in my hometown. There was an article on dhirubhaii in our local newspaper...when he was felicitated by Dean’s medal from Wharton Business School (Anil’s almamater).

One fine day both the brothers decided to choose their own way thus unlocking the valuations hidden in the group companies…be it RPL…REL…RIIL…RCL…RCVL…and few more like Jai Corporation (promoted by Anand Jain…mukesh’s right hand). As on date all Reliance group companies are behemoth in themselves…assisting millions of shareholders in realizing their dreams…to become rich. There are so many middle class people who supports entire Reliance group…these people have bought their homes….ensured their children’s marriages just from the earnings from reliance shares. Dhirubhaii, a humble middle class person, but with big dreams in his vision is the key architecture of this entire Indian capital market.

Hats off to Dhirubhaii and his two sons…

Assertiveness skills...

Yesterday I attended full day training on developing assertiveness skills. The entire training was really good…full of activities like role play on various situations…discussions on various personal experiences etc. I got a chance to narrate the recent incident happened with me…hope the reader of this blog will enjoy this…

(Before going through the case below…let me tell you there are 4 kinds of behavioral traits: Assertive, Passive, Aggressive, Passive – Aggressive).

Following is my case:

This case is about Nilubhaii and his 2 good close friends; say, Person X & person Y.

Person X has joined a new job in an insurance company couple of months back. As a new entrant he has to undergo lot of pressure and slog accordingly. One day around some month end X came to nilubhaii and discussed one of the problems in his job. X said now we are approaching to month end and I don’t have any prospective client from whom I can register an insurance policy by 5th of the next month. And if he fails to do so then his name will appear in ZERO club list (ZERO club list highlights the name of those people in office who have failed to book any policy by 5th of the new month). Last month he had his name in this list and again now its going to be there. But if this time it appears again there it will have very negative impact on his performance per se. So, he asked nilubhaii for some help to avoid this. He said he will register a policy in his (nilubhaii’s) name and will cancel it immediately within next 2-3 days before the policy get issued. Nilubhaii always considered X as very good friend and definitely he didn’t have any problem in helping his friend. Also the amount involved was quite less.

As per the plan the policy is registered in Nilubhaii’s name with all the formalities duly completed. But here because of personal reasons nilubhaii went out of town for couple of weeks. Meanwhile X got busy in his schedule and forgot about the cancellation of policy. When nilubhaii returned after couple of weeks he got the policy document. He was not able to understand how come that policy got issued at first place. He called up X and informed him about that. X asked him to check the policy and let him know what is free period (within 15 days after the policy is issued it can be cancelled and it is called as free period). Nilubhaii informed him that almost 14 days are already over and hence he need to act fast. But ultimately X couldn’t.

Now the policy got registered in Nilubhaii’s name and there was no way it could be cancelled. Also he asked X couple of times about it and every time X was saying that there is some problem in the cancellation of the policy.

Meanwhile for nilubhaii some urgent financial commitments pop up at personal & professional level. He successfully honored all the deals but ultimately ran out of liquidity. At this moment another person Y, again a very good & close friend of nilubhaii came to him and requested for some financial assistance. Actually person Y was not in good condition financially and because of some unavoidable circumstances and emergency medical reason at home suddenly this requirement of huge financial need pop up. Nilubhaii told him that he won’t be in position to help Y that large financially; but, yes, definitely he will help Y within his limits.

Now nilubhaii himself was in liquidity crisis from some time. So he thought better would be to get in touch with X and asked him for repayment of his amount (It was decided earlier that if X failed to cancel the policy then he will return nilubhaii the requisite amount from his pocket). Accordingly he contacted X and asked for the refund. As X & Y didn’t know each other nilubhaii didn’t explained the actual reason for refund to X. But X was too much occupied in his own work and ultimately failed to refund the amount. He delayed the payment for almost 2 weeks. And here nilubhaii was in tension because he had to help anyhow to Y whose need was genuine.

Finally nilubhaii started reminding X very frequently but all the reminders went in vain. One day nilubhaii sent X a message with some aggressive comments like: “Where the hell is my money…” But X took it the other way round and thought what kind of friend this guy nilubhaii is…he is talking to me such a manner…he keeps on saying always that we are best friends of each other…and so on…and now sending these kind of messages to him. Really nilubhaii is not worth friend kind of a person. Here the friendly relations between nilubhaii and X got spoiled. X returned the amount somewhat angrily…and nilubhaii forwarded the same to Y.

Now X is so angry with nilubhaii that he has almost said Good bye forever to him. But nilubhaii don’t want to break this friendship as there is no any reason as such. It was just for the moment that aggressive comment came out. That was the only mistake of nilubhaii.


Here following kind of behavioral traits can be observed in respect of nilubhaii:
- Passive: when he agreed to demands of both X & Y
- Aggressive: when he sent the message to X

Your task is to:
- Suggest at which stages how being assertive might have helped nilubhaii to maintain his relationships with both X & Y.
- What would have been the best possible assertive responses at these stages.
- Now since the relation is already spoiled with X what should be the next course of action for nilubhaii.

Musical Extravaganza at every weekend…

Now a days I got addicted to 3 rather 2 special musical shows on TV channels. Indian Idol - Sony; Sa Re Ga Ma – Zee, and Voice of India – Star plus. The quality of singers is Sa Re Ga Ma is simply amazing as compared to Indian Idol and Voice of India. If I have to rate on the scale of 10 I will give 10 / 10 to Sa Re Ga Ma…8 to VOI and 5 to Indian Idol.

Its really great to see that there are such a huge highly talented singers in remote areas of India and of course thanks to these channels for bringing this talent in spotlight. I will never forget the way in which from Sa Re Ga Ma…Amanat Ali from Pakistan has sung “Yee Housla” from the movie DOR. But he had a tough fight from Raja Hassan from Rajasthan. Truly speaking I feel Raja Hassan will bag the finale definitely…and second runner up would be Amanat Ali from Pakistan followed by Mussarat again from Pakistan…then Aneek from India…followed by Mauli from Canada…then Pocket size power house from Lucknow…Punam…and then Barbie Doll from Chhattisgarh …Sumedha…But given the Pakistani background of the above 2 singers at position 2 & 3 there might be some bias in voting and positions may change. but ideally this should be the exact run up.

Of course other than Sa Re Ga Ma Pa…singers from VOI are fantastic…If I have to rate them…ideally Harshit from UP must win the final title..and run up would be Ishmeet from Ludhiana…Priyani from Indore…Abhas from Jabalpur…Irfan from Rajasthan…Sumitra from Mumbai (somebody told me that she is from Infy Banglore)…Abhilasha from Pune…Mirande from Gujrat…Intially Abhilasha seemed to be good contestant but because of her missing lines second time in last to last episode she has lost the ground and looked little bit low on confidence as well. Last Friday’s exit of Toshi was really shocking. There are couple of people there in the group who are supposed to be voted out before this person like Toshi move out. Its really too early exit for Toshi from Rajasthan.
After the announcement of his exit the entire scene was very emotional on the stage and perhaps in my drawing room as well…L.
Toshi seemed to be a genuine hard worker guy who has risen from the ashes on the basis of his hard work and dedication. He also said at the end that he had came from very modest background and when he used to sing earlier in his locality…he always used to cry that whether his singing ability..prowess will go in vain in this manner. But VOI has given him the suitable platform to display his talent. he was worried on his exit that he will have to return again to that place. But Abhijit Da…has done a commendable job by declaring that he is going to adopt Toshi…and now onwards wherever Toshi goes he will go in his (Abhijit Da’s) car..with full respect and dignity. Hats off to Abhijit Da.

This live eg. of Toshi has highlighted the fact that if you remain dedicated to your task no matter whatever would be the circumstances…and keep your faith in ALMIGHTY intact…you are bound to reach that pinnacle. These small kind of Ups and Downs will be definitely there…but never get hassled because of these….

About Indian Idol…I don’t want to comment anything because the quality stands no where as compared to tother 2 programs…and morever its on the verge of getting over now within next 2 weeks…hopefully either Amit Paul or Emon will be the next Indian idol…no chance for Prashant tamang…but shocking to see that he is till there in the show. he must have been voted out long back…Lets see…