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Why M&A deals don’t workout well in India?

: Ankita Mohnot

Mergers  and  acquisitions  play  a  key  part  in  the  growing  economy.  Experts  say  it  is  like  a  marriage  between  2  businesses.

But  while  Indian  marriages  are  known  for  staying  for  life,  mergers  and  acquisitions  have  a  different  story.

There  are  many  factors  stacked  against  it.

Let  us  see  some  of  the  factors  which  make  it  difBicult  for  M&A  deals  to  be  successful  in  India:

Psychological  Factors:

Indian  SMEs  are  emotionally  attached  to  their  businesses.  They  see  it  as  a  part  of  their  identity.  That’s  why  many  times  they  cling  on  to  it  under  losses,  rather  than  sharing  it  with  some  other  business  house.

Lack  of  proper  Accounting:

Most  of  the  Indian  SMEs  have  their  accounts  so  complex  that  only  the  owner  and  the  accountants  can  understand  it.  Many  dealings  happen  in  cash  and  that  makes  it  even  more  complex.

On  basis  of  such  data  it  is  not  possible  to  create  a  true  value  of  the  Birm.

It  becomes  a  case  of  trust  and  faith.  That’s  why  many  Birms  which  might  be  well  run  can’t  get  a  suitable  partner  /  buyer.

Lack  of  proper  due  diligence:

Due  diligence  is  often  overlooked.  It’s  not  only  the  Binance,  even  the  culture  Bit,  ongoing  projects  and  other  factors  must  be  taken  into  account  while  going  through  the  due  diligence  process.

Only  when  there  is  a  win-­‐win  synergy  that  companies  should  go  for  merger  and  acquisition.

Often  the  companies  do  not  have  the  capacity  to  create  such  a  due  diligence  on  its  own.

Lack  of  integrating  systems:

Two  companies  merging  into  one  is  not  just  a  new  balance  sheet.  Integration  has  to  be  done  at  all  levels,  from  resizing  to  creating  new  departments  and  putting  in  place  new  processes.

If  there  is  no  vision  for  integrating  the  strengths  of  two  partners  the  M&A  might  happen  but  it  doesn’t  result  in  it’s  true  potential.

Lack  of  M&A  experts;

While  there  are  experts,  they  mostly  work  with  big  companies  and  fail  to  understand  and  respond  to  SME  situations.  They  can’t  appreciate  the  SME  accounting  methods.  They  go  by  the  books  and  ask  questions  which  might  be  insulting  to  the  SMEs.

Many  of  the  above  factors  can  be  avoided  by  involving  competent  SME  consultants  who  know  the  industry  bench  marks  and  can  push  both  partners  for  a  due  diligence  which  is  complete  and  thorough.

A  competent  consultant  know  the  pitfalls  of  the  process,  they  also  understand  the  psychological  pressures  of  such  a  deal.  They  can  help  you  avoid  a  bad  deal  and  make  a  deal  which  can  result  in  a  win-­‐win  solution.

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