A clear vision on the growth path of the company can help its promoters look for like-minded organizations, which can be acquired in order to enable the company to grow bigger and better. However, caution must be exercised, and partners must be ready to take on the challenges of the process

Companies merging and acquiring each other always make big news. Most of the time, solution providers read about these and aspire to do the same. But most shy away because they feel that they are not prepared for it. Often, even if they are, the entrepreneurs are unsure of how to go about it and wish they had a peer who has already gone through it so that they could guide them.

This is precisely why the third DQ Channels SP Summit had a presentation on 'Identifying and Managing Acquisitions.' Sanjiv Bhavnani, the presenter of this session, spearheaded the acquisition of Infotecnics India for Rs 6.12 crore in 2002. His company, Visesh Infotecnics, was declared a winner in the Deloitte Technology Fast 500 Asia Pacific 2007 program, making it to the first 250 of the Fast 500, with a ranking of 246, based on a three-year percentage revenue growth of 210.76 percent. This makes it the third year in a row, that Visesh has won this recognition at both APAC and India levels.

Thorough planning needed
Talking about how to go about acquisitions, Bhavnani said that it requires a lot of thought process, and when contem­plating on such an exercise, one must carefully consider bottomline, market oppor­tunities, IPOs etc. But most importantly entrepreneurs should consider 'people'. Ultimately all these different aspects together determine the success of an acquisition.

“One needs to plan well and only then go ahead with the exercise. Of course, it is a known fact that acquisition of companies is based on the degree to which the solutions and products of the entities compliment each other,” Bhavnani said.

“It is a known fact that acquisition of companies is based on the degree to which the solutions and products of the entities compliment each other. Thus one needs to plan well and only then go ahead with the exercise” Sanjiv Bhavnani MD, Visesh Infotechnics	It is ideal if all stakeholders-management, employees, internal and external customers-are taken into confidence about the need for the said acquisition and how this is likely to impact each of them

He further added that market situations are the key factors that determine the course and cause for acquisitions. “Manpower is another key determinant and the success of an acquisition. It depends on the extent of diversification that one can take up in term of processes post acquisition,” said Bhavani.

Financial specifications are also a crucial factor and one must consider the segments where the acquiring companies can operate before going forth. “Also valuation would become a key step forward post acquisition,” he added.

Thinking into the future
According to Bhavnani, it is also important that company promoters sit back and think about the various technology platforms that can be created post acquisition and make the required preparations for that. “Also one must ensure that solutions and software of the companies are scalable post acquisition so that both can learn to innovate and grow together,” he indicated.

Noting that approval from the various Boards of Directors is crucial for an acquisition to become successful and agree­ment with various shareholders must be taken before embarking on the exercise, he said, “It is ideal if all stakeholders-management, employees, internal and external customers-are taken into confidence about the need for the said acquisition and how this is likely to impact each of them. Such clarity will ensure that business operations are not affected during and after the acquisition process.”

Speaking about Visesh's various acquisitions, Bhavnani said that if one is clear about how he wants to grow, then inorganic ways of expansion-be it mergers or acquisitions-would go a long way to help that growth. As far as the future is concerned, he said that Visesh would work to create wealth by creating scalable solutions and processes that would be in sync with the market scenario around.

Stressing on this, he said that mergers and acquisitions come with a fair share of challenges, and he urged solution partners to be prepared to deal with them so that exercises like mergers and acquisitions truly serve their purpose of furthering a company's growth.

Partners listening to his session were impressed by the openness with which he spoke on the challenges he faced while acquiring other companies. It also gave them a clear picture on what to expect if they chose to acquire a company.

Said one partner, “While most of us focus on the immediate and future financial implications, few of us spare thought to manpower adjustments that need to be considered as well. This is very important, because we have seen how mergers in several IT vendor companies in India have not been smooth because the manage­ment had not clearly outlined how the business managers of both companies will be impacted.”

The session gave a lot of fodder for thought to the audience. It will not be surprising to hear of some acquisitions by and of solution providers, before this year draws to an end.

DQC News Bureau

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