How did Indian companies transform from local players to global acquirers? A fascinating study reveals the strategic evolution of Indian enterprises in the early 2000s.
The New Wave of Indian Global Expansion
Picture this: It’s the late 1990s, and Indian companies are beginning to look beyond their borders in unprecedented ways. Between 1992-2001, Indian firms spent a staggering $5 billion acquiring companies overseas – nearly half of all cross-border deals involving India. By 2001, these overseas acquisitions had skyrocketed from just $11 million in 1998 to over $2 billion.
Who Were These Global Shoppers?
The story unfolds across two main chapters:
The Software Surge
- Leading the charge was India’s booming software sector, accounting for 64% of all overseas acquisitions
- Companies sought to establish global presence and access new markets
- Key targets: Developed markets, especially the US and UK
Manufacturing Makes Its Mark
- Pharmaceutical companies emerged as particularly active buyers
- Diverse sectors from tea to automotive joined the acquisition spree
- Focus on acquiring technology and established brands
The Strategy Behind the Spending
Why did Indian companies go shopping abroad? The research reveals five key motivations:
- Market Access: Acquiring existing companies provided instant access to new markets and customer bases
- Technology & Talent: Many acquisitions aimed to obtain cutting-edge technology and skilled personnel
- Example: Ranbaxy’s acquisition of RPG Aventis gave it advanced research capabilities
- Tata Tea’s Tetley purchase brought new packaging and quality improvement methods
- Operational Synergies: Companies sought complementary businesses to create efficiency
- Example: Usha Beltron combined its steel-making capabilities with global distribution networks
- Growth Beyond Borders: Limited domestic market growth pushed companies to seek opportunities abroad
- Competitive Survival: Global expansion became crucial for surviving in an increasingly open Indian economy
What Made a Global Acquirer?
The research identified distinct characteristics of companies that went global:
In Manufacturing:
- Larger company size
- Higher investment in research & development
In Software:
- Older, more established companies
- Larger size
- Strong export orientation
The Bigger Picture
This wave of overseas acquisitions marked a crucial shift in Indian business history. Companies weren’t just growing – they were transforming from local players to global competitors. The pattern of acquisitions revealed a strategic focus on developed markets, suggesting Indian companies were confident enough to compete in the world’s most sophisticated business environments.
Looking Forward
The study suggests this is just the beginning. With liberalized policies and growing confidence, Indian companies are increasingly seeing overseas acquisitions as a key tool for:
- Accessing new markets
- Acquiring technology and skills
- Building global competitive advantage
- Ensuring long-term survival in a globalized economy
This transformation of Indian enterprises from domestic players to global acquirers represents not just corporate growth, but the emergence of India as a significant force in the global business landscape.
Academic Abstract:
This paper examines the patterns and motivations behind the overseas M&As by Indian enterprises. It is found that a large majority of overseas M&As originated within services sector led by software industry and in overwhelming cases were directed towards developed countries of the world economy. The main motivations of Indian firm’ s overseas acquisitions have been to access intonational market, firm-specific intangibles like technology and human skills, benefits from operational synergies, overcome constraints from limited home market growth, and survive in an increasingly competitive business environment. Further it has been found that overseas acquirers in the case of manufacturing sector tends to be large-sized and research-intensive, while they are older, large sized and export-oriented in the case of software sector.
Learn More:
Full citation: Pradhan, Jaya Prakash and Vinoj Abraham (2005), ‘Overseas Mergers and Acquisitions by Indian Enterprises: Patterns and Motivations’ (with V. Abraham), Indian Journal of Economics, 85(33), pp. 365–386, Publisher: University of Allahabad.
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