Everyone's Up For Grabs

In recent times of my interactions with partners, I met one large national
distributor, a well-established national solution provider (SP) and two regional
SPs. Besides the fact that they belong to the same industry, there is another
common thread running through them. They are all open to the idea of either
merging themselves with another organization partially or getting acquired
entirely.

While the last two companies in this trio could do with the improved cash
flow post an M&A, what surprised me was the fact that the other two had decent
cash reserves and did not need funds to fuel their business expansion and growth
plans. Yet they were open to have another entity invest in their business and be
on the board for all important decision-making. Is this merely an ongoing trend
in the channel business?

M&As have been in the news for a better part of last fiscal. And why not?
There are global MNCs, which are no longer interested in pumping money into the
US and European markets, where business is going on at its own pace. Instead,
they are looking more at the BRIC countries.

According to various sources, while Brazil and Russia are plodding along,
China is headed for a slowdown because it has become more of a contract
manufacturing country, which economists say will not sustain its economy for
long, especially since the development is happening only in some pockets of the
country.

Vinita Bhatia vinitavs@cybermedia.co.in

India, on the other hand, has been showing consistent growth and a good
amount of this growth is fuelled by internal demand, which means that it will be
able to adapt itself better to the vagaries of international economies. Also, a
nine percent GDP growth in the face of a global recession is not a bad feat to
be achieved by a developing nation, which has also become the outsourcing and
knowledge processing stomping ground of the world.

Add to this the fact that India also figures as one of the largest markets
for telecommunications with IT becoming more pervasive across all business
environments. The potential is huge and this is why MNCs are falling over
themselves to make an entree into the country.

And rather than spend crucial time and money on building their own
infrastructure, it is much faster and easier for these global companies to
simply acquire another organization which has its presence pan-India, knows the
tricks of the trade and can deliver the goods with the right amount of fiscal
push.

Against this backdrop, place SPs who are facing increasing competition,
decreasing profit margins, limited available funds to chart out their business
growth with as well rampant commoditization of their core business. Tying up
with a global giant and having fresh funds infused into their organization's
bloodstream suddenly lets them become a more aggressive player in their business
domain. Not to mention, they gain access to a wider customer base backed with
best business practices provided by their global counterparts. It sounds like a
win-win situation for all parties concerned.

But is it really as good as that? What about loss of control on the business
operations? A lot of SPs who had entered into JVs or M&As are beginning to find
themselves sidelined in boardroom meetings and have little else to do other than
offer visionary statements to their people.

They are discontent but reluctant to own up to it and put up a brave front.
Because they did what they had to do at a time when sustenance of the business
was itself a question mark. But now they are asking, was it really worth it? The
debate is open and I would like to hear some forthright opinions on this.