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Prime Minister Manmohan Singh's statement recently that we could expect tough
times ahead did not come as a surprise for most solution providers (SP) in the
country. Most of them had already primed themselves for a rocky ride ahead.
What is interesting is that a lot of these companies are now seriously
evaluating opting for a merger or acquisition in a bid to secure their
bottomline or post healthy growth. Gone are the days when entrepreneurs started
their business and dreamed of having it as a family-run outfit for years to
come. The current breed of entrepreneurs would rather be managing a healthy
business, even if it means collaborating with other companies and ensuring their
buy is a profit making entity.
In a tough economy, entrepreneurs are more likely to sell their businesses.
But it is also a proven fact that during a recessionary trend in the market,
large ticket deals are rare as all companies would like to keep their cash in
hand as much as possible.
Instead there will be consolidation, as smaller companies will have to find
larger entities that can help them achieve their business targets. In short,
expect a lot of M&As to happen amongst the smaller organizations in the next few
months. But how do these smaller companies make themselves viable business
propositions.
Firstly, it is imperative that they take a close look at the actual valuation
of their business. Ideally the promoters should take stock of the value they can
offer to any company that is considering buying them out. They should also form
a core group of some key people in the company who can present on its viability.
If you are in the business of offering solutions, chances are you will find more
takers because box pushing has become more or less of a no-brainer chore.
Offering services on the other hand is something, which takes years to build as
a competency so there are more companies willing to acquire solution-providing
outfits.
And lastly, read the cover story ofDQ Channels this issue to know what other
advice have been given by SP who have gone the M&A way and their experiences and
learning in the entire process.
Vinita Bhatia
vinitavs@cybermedia.co.in Page(s) 1
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