Having kicked off its global ambitions with a string of mergers & acquisitions(M&As) in the industrial products, pharma, IT, oil & gas and other sectors, India Inc has now started sewing cross-border brand acquisitions. These brand-led acquisitions have been primarily in the food & beverage, textile and FMCG sectors.
While a majority of these deals relate to brands whose presence is limited to one or a few particular markets, the pipeline includes few mega deals involving global consumer brands.
The size of the completed consumer product and retail brand-led M&As over the last ten months has crossed the $500m mark. However, if big deals like that of UB Group's interest in Whyte & Mackay and Videocon - which is among the final shortlist of bidders for Daewoo Electronics - is counted, then the pipeline looks robust enough to push total brand-led cross border acquisitions in the billion dollar league during '05.
Says brand consultant Harish Bijoor, "Even large Indian companies are realising that they are small in the global world. Brand acquisitions is an easy way to expand abroad. It also indicates a very clear fast growth strategy instead of waiting to build one's own brand overseas."
There is also the risk factor. Says Hoshedar Press, executive director & president, Godrej Consumer, "Building a new brand is not easy. By acquiring a branded business one gets hold of a proven success. If one starts from scratch in a new market there is the issue of probability of success which needs to be evaluated." Godrej Consumer recently sealed its deal to acquire UK-based Keyline Brands which included FMCG brands like Cuticura, Erasmic and Nulon.
The trend gained strength after Apeejay Group's acquisition of UK-based Premier Foods' tea business last year. This came with brands such as Typhoo, London Fruit & Herb and Lift among others. At the same time Tata Tea acquired Good Earth - one of the fastest growing specialist tea brands in the US.
Then there was Welspun's acquisition of UK's towel brand Christy and GHCL's acquisition of US-based Dan River which has brands like Bed In a Bag, Marquis Home Collections and Alexander Julian. More recently, UB group acquired French wine-maker Bouvet-Ladubay and Tata Coffee acquired US-based Eight O'Clock Coffee. According to Harish HV, head(M&A), Grant Thornton India, "Cross-border acquisitions typically have been non front-end but the next phase would involve brands.
This is a logical progression as Indian companies gain confidence of managing outside India." Cross-border brand acquisitions was an area where Chinese companies had overshadowed India Inc with TCL acquiring defunct German television brand Schneider and following it up with global CTV brand rights for Thomson and RCA.
Chinese appliance major Haier also hit headlines while bidding for American white goods brand Maytag, which was later picked up by Whirlpool. According to international media reports, BMW has agreed in principle to sell the Rover trade mark to the Chinese auto company Shanghai Automotive .
However, there are question marks over how successful will Chinese companies be as managing brands is not considered to be their USP. This is one area where Indian companies might have an edge. In the early phase of global acquisitions by Indian companies there were one-off cases of brand acquisitions like Tatas acquiring Tetley. But the new trend of brand acquisitions becoming part of globalisation strategy of Indian companies is here to stay.