By James Eugene
Mergers & Acquisitions (M&A), especially in emerging markets, is a trend that will be watched closely by many investors over the next few years. The motivations for M&A in these countries may differ slightly when compared to the transactions of ownership in developed markets, as YouTuber Bryan Halay kindly points out for us.
Companies in emerging economies that undertake M&A usually do so to acquire “new competencies, technologies and knowledge essential to their strategies”. There is more of a long-term aspect to this, with managers being more prepared to wait a longer period of time for a payoff, rather than selling up in the short or medium term.
One of the examples that Halay uses is Hindalco Industries Limited, an Indian-based aluminium company. Hindalco entered many takeover agreements, such as obtaining a large stake in Indal (Indian Aluminum Company Limited) in 2000 and Utkal Alumina Project in 2007. The most notable acquisition occurred in February 2007 when the company agreed to acquire Novelis, a Canadian based company, for $6 billion, eventually establishing the world’s largest rolled-aluminum producer, allowing it to produce high quality goods at a low cost.
The four basics for developing capabilities, which are touched upon in the video, include:
- Seize the moment (carpe diem)
- Build strength by developing a business model
- Scale and consolidate through acquisitions
- Expand into higher value customer segments and international markets
Halay’s brief but extremely interesting video is below. I hope you’ll enjoy it:
EmergingFront 