M&A Strategy: Things To Keep In Mind

A second panel saw panellists throw light on how they are developing a rigorous M&A (mergers and acquisitions) strategy while also touching upon finer details like how different a beast digital M&A is compared with traditional M&A and what are the considerations associated with buying innovation.

The panellists included Nishant Verman, vice-president and head (corporate development and strategic partnerships), Flipkart; Chandru Chawla, head (corporate strategy, M&A and new ventures), Cipla; Sundareswaran S., executive director, Morgan Stanley; Saugata Bhattacharya, senior vice-president and chief economist, Axis Bank Ltd; Makarand Padalkar, chief financial officer, Oracle Financial Services Software Ltd; Vivek Gupta, partner and head (tax M&A team), KPMG; and Sridhar Gorthi, partner, Trilegal. The discussion was moderated by Shrija Agrawal, national deals editor at Mint. Edited excerpts:

How does India’s top consumer internet firm think about M&A? You just raised a huge round of funding from SoftBank, are you preparing a war chest for acquisitions?

Verman: We are in an industry which is arguably 10 years old. E-commerce interest is just 2% right now but we believe that at some point this 2% will become 20. We have to think as to how should we accelerate innovation and this innovation can take the shape of some core capabilities or consumers. We work backwards from saying what a customer needs, what innovation will be required. Today when I look back, between the three group companies, we have about 65-70% market share. If you see how many consumers are buying online today and if I were to increase the number of customers that are buying online then I have to work in a way to make them buy more things online. There is an infrastructure layer, which makes the buying behaviour of a customer smoother and faster or quicker whether it is category expansion like grocery.

I need to think how we work in these areas (category expansion), and what are the capabilities that I might need. As to new customers, we are looking at both urban and semi-urban market. Eventually, all of India should buy from us. There are people who have access to customers and have a relationship with customers that we don’t have and we need to be faster to do something about that. When it comes to infrastructure and logistics, we continue to look at what others are doing and maybe partner with them. Wherever we see innovation in infrastructure and core capabilities, we will continue to buy.

What about Cipla’s M&A strategy? You recently stepped up your game with acquisitions in the US?

Chawla: Cipla has been transforming itself to become more innovation-oriented, more geographically diversified and also to take a jump in the US market where unlike our peers we were a bit late to enter. So it called for a bold and large inorganic move which we have completed. The external world seems to be positive as we took the right move. We are not in the fashion industry where we should be looking at what we do every other day. Firms like us, based on the old world of brick-and-mortar model, we have to think long-term and stay focused. The focus has to be our key mantra for the coming five-seven years.

For us, the US will still remain a big growth driver. There are tidal waves in the US at the moment. The timing was a little bit surprising. There is a lot more consolidation to happen. Health budgets are under serious pressure. The kind of mercenary and credit pricing that was quite phenomenal in the US won’t be possible in the future. But for companies like us, there are ample opportunities to climb up the value curve in a more innovation-oriented model without relying on the business models of the past. For companies like us, the basic model was copying the generic medicines. It had a copy-cat mindset which is different from an innovator’s mindset. You cannot incubate a company like Google or Facebook in a company like Infosys. Five years ago we created New Ventures which was like an internal incubator. The new things that we want to do require a completely new ecosystem. We started doing that in a unique way by sequestering it from the mainstream. Consumer health is a great example and we realised that it is not a pharmaceutical game, but rather a fast moving consumer goods (FMCG) game. Pharma company is more front-ended in a way that it gives returns on investment. An FMCG company, on the other hand, is more back-ended. We invited private equity to invest; that went well. Consumer health, creating an innovation-oriented business in the US and consolidation in India in a big-bang emerging markets are our key growth driving factors.

Consumer health, creating innovation oriented business in the US and consolidation in India in a big-bang emerging markets are our key growth driving factors.– Chandru Chawla, head (corporate strategy, M&A and new ventures), Cipla.

Could you break down the good, the bad and the ugly for us and what corporates should factor in when making investment decisions?

Bhattacharya: We are going through a mess due to the goods and services tax (GST) system. That’s a short-term pain which is the ugly pain. But there are lots of goods. As for macros, we are the darling of foreign investors. Global investors are all very bullish on India. The infrastructure is getting better, the government has a vision and they are willing to execute it. The legislative system is improving with the infrastructure, insolvency and bankruptcy laws, GST in particular and Real Estate Regulatory Authority (RERA).

The best parts are some structural shifts that are happening in the system like homogenization and financialization of the system. This includes people moving from cash to digital platforms. The tax revenues of the government have increased as a lot of people are complying with the tax regime and the government has become efficient in spending this money. Our payment systems are the best in the world. There is nothing better in the world than the unified payments interface (UPI)s. However, sooner or later one downside of this digitization is that you will lose on the regular salaried job market. It will be more of a sharing economy but with this comes the marketplace. There are three characteristics of this market-driven economy. One, this is very information-centric, particularly information with a lot of asymmetries. Secondly, more the number of customers you acquire, the more valuable the company is which is the key to the economy. What comes from combining these two is the stickiness that you can induce in your customer base. This can bring changes in the business model that the companies can begin to use to acquire scale. The key focus on short-term profits will slowly begin to dissolve and move further. The focus will now be a long-term capital strategy. That are the key changes you are likely to see in the next 10 years.

There is so much capital available out there. We have SoftBank Vision Fund, Canada’s CDPQ, CPPIB and other private equity players investing too much capital in too few assets. Is Canada the new Japan? What is your take on this?

Sundareswaran: There are new pools of assets. There is a diversification of assets. Sovereigns funds come from all parts of the world. The pools of capital have become large from what it was. People are no longer really dependent on asset managers. People are willing to take direct investments. In terms of chasing the sectors, there will be a moment at times where one set of sectors will be more attractive than the others. In general, we feel that we are in a zone where growth is going to be strong.

Give us a sense of what you are seeing in the information technology (IT) sector right now? Oracle has been a very prolific acquirer globally but not in India?

Padalkar: IT sector as of now is full of M&As both of shape and size. In this particular sector, a lot of intangibles are needed and this is one of the challenges in this sector. There are expectations of growth as we move forward. The second problem in IT is to determine a good valuation model for innovation. The third problem in IT is with people because while we all say that we make IT independent of people but in practice, it is not true. People suffer structural change when an asset is acquired. Ability to assimilate new talent and not let them go is another key factor which is taken into consideration. Fourth thing which happens in IT is that most of the acquisitions are done at a slightly green field or an advanced stage and therefore the capital required to make it successful is a difficult game. The challenge comes when there is not so much appetite for capital funding in an organization for an M&A. At a firm level, the decision of M&A, we take at a global level. We look for global footprint and not region specific. In India, there are no core IT assets available.

IT sector as of now is full of M&As both of shape and size. In this particular sector, a lot of intangibles are needed and this is one of the challenges in this sector.– Makarand Padalkar, CFO, Oracle Financial Services Software Ltd.

As a tax expert, if you could give us a sense of evolving tax laws in M&As which corporates should be cognizant of in the near future?

Gupta: Historically, we have been in a tax environment where largely we have followed a rule-based approach as to how we structure our taxes. Fundamentally, over the last three or four years, an overlay of substance norm is coming in. Ten years ago, lots of firms migrated ownership from India to overseas and to do that now under the current tax regime is far more challenging. Externalization was very simple 10 years ago but now the rules have been changed. We are now in a regime, where we are transitioning perhaps from a rule-based law to a substance-based law.

Give us a sense of how deal-making has evolved in the country. There is so much of talk around consolidation, tomorrow if Uber were to acquire or merge with Ola, which is not far or a distant possibility, will that be considered monopolistic by Competition Commission of India (CCI)? How are they looking at these transactions? We saw CCI setting the stage for Lafarge to sell some of its India assets to consummate its merger with Holcim?

Gorthi: From a legal adviser’s perspective, deal-making has evolved structurally almost unrecognisable from a decade ago. The environment is in a stage of transition. Structural changes like bankruptcy code, RERA, all these changes how they will play out is yet to be seen. The answer to your question of Uber acquiring Ola is little surprising. If this thing happens it will have a monopoly in the market and will have a massive market share but some of the mega-mergers, the experience has shown that the CCI is the most pro-active and facilitative regulator. The competition regime when first came in through and CCI was put into play, merger control became a thing. The first concern for many of us had that it is going to be a bottleneck and will slow down the pace of M&A. The actual experience, however, is different. So often if you see large transactions which require approvals from a number of different regulators, CCI has become an interactive facilitator in giving guidance. They have the power to disallow the transactions and internationally this happens very often. They have been facilitative in a few transactions. So Ola-Uber merger or an acquisition is likely to run more into difficulties on government policies for aggregators rather than monopolistic.

Vivek, if you can throw some light on how the present dispensation is trying to create a positive environment for investors? Has abolition of foreign investment promotion board (FIPB) proven to be a good move or a bad move?

Gupta: The intention is all correct and in the right direction. The government has come out with the guidelines for e-commerce and foreign direct investments (FDI). A lot of sectors have been opened up for investment. It is too soon to say whether clearances will become easier or not. Many applauded the abolition of FIPB. As per our interaction with FIPB for the past five to seven years, it was actually a body that got together with various parts of government. FIPB provided a forum where the government could take a decision together. They acted as a mechanism whereby the government was forced to respond to the meeting which was held every alternate week and there was a committee which would then take a joint call. I don’t quite know whether putting this power back in the hands of the administrative ministry will hasten approvals or it wouldn’t. I am holding my judgement on whether abolition of FIPB is a good or bad move, although from an intention standpoint, it was a good intent and we should remove bureaucracy wherever we can.

What we are seeing now is domestic consolidation, industry leaders coming together; it is no longer about who is controlling the business.– Sundareswaran S., executive director, Morgan Stanley.

Sundareswaran, as an investment bank, how are the deals in your pipeline looking like; where do you see most of the deals coming from?

Sundareswaran: Historically, we have always done inbound transactions which used to constitute 50% of the overall deal value, but that is changing a bit. What we are seeing now is domestic consolidation, industry leaders coming together; it is no longer about who is controlling the business. We are also seeing inbound interest coming back. Outbound transactions have been selective and therefore mega or large outbound deals would be fewer compared to inbound deals.

What is at the heart of e-commerce M&A which is largely a winner-takes-all market?

Verman: We acquire companies for people. One of the things which we keep in mind is thinking of who will continue to stay with us. We have hundreds of millions of customers and we don’t spend on marketing anymore. So if we acquire someone it makes sense on making them continue. Myntra is a good example. We let them build their own brand. One of the core areas for our M&A strategy is ‘category’, where we think what are those categories which we have tried to build or where do we get acceleration in six-nine months. Today, we do have a strong customer base and we would acquire for core capabilities and not for customers. The capital which we have today allows us to be very aggressive. The second area of focus for M&A would be around thinking of how to accelerate profitability.

How are you using Big Data for your M&A decisions?

Verman: Data is at the heart of what we do. As a digital platform, we have the ability to see a customer’s behaviour. With data, we can keep a track of customer behaviour changing over time and that builds into a firm’s strategy. We acquire in areas where we see a gap in the product roadmap.

This article originally appeared in Live Mint.

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A Disease Called Myth

Real life is the fertile hub of startling insights. Picture this scenario straight from life.

A 6-year-old Indian boy in an urban metropolis was diagnosed with mild persistent asthma and had been started on daily inhaled corticosteroid. At a follow-up visit in 2 months, his symptoms had worsened and the dose of the corticosteroid was increased.

During a home visit required by the research protocol, the research team noted that there were a significant number of incense candles and sticks burning in the living room, a place where the child spent most of his time. At a subsequent clinic visit, it was suggested to the mother that the incense burning may be the primary cause for the poor control of asthma. The mother responded in agreement that she was aware that this could be the problem. However, since it was her mother-in-law’s practice and something she could not oppose due to her cultural upbringing, she was expected to comply.

Cut to another story where an Indian mother expressed outright denial when given a diagnosis of asthma in their child. The acceptance of the diagnosis of asthma results in the acknowledgement by the parent that their child carries a chronic illness resulting in an “imperfect “child. Certain other beliefs attribute the cause of asthma to ‘lack of love’ from a mother!

Watch how belief further mutates into bizarre myths. Asthma is usually seen as a serious disease, which leads to death, a belief propagated by the Bollywood cultural movies and stories in which the Asian Indians are used to seeing the major actors clutching their chests while looking for their asthma inhalers and succumbing to their illness. Since the respiratory symptoms of asthma have usually been portrayed as life-threatening which often take the life of the person with the disease, a barrier in the acceptance of the diagnosis and the treatment of this disease is inherently prevalent.

More stories populate the diverse panorama of India’s socio-religious ethos. Spiritual healers are often used to do special prayers and create special magical concoctions, which are given to the child for their well-being and treatment of the chronic illness. Belief in horoscopes and their effects are well-accepted factors that can influence the child’s health. Horoscopes are evaluated by specialists to determine the chronicity of the illness and for prediction of improvements in those conditions. Special articles of religious significance are given to the child to wear. Removal of these articles even if required by medical professionals is considered inauspicious to the point where it may aggravate the symptoms of the disease and distance the provider from the family of the illness.

Home remedies, such as tea, hot water, walking, ginger and turmeric, are perceived to provide relief in asthma.

Clearly, there is a cultural/folk cognition of asthma -the disease that permeates all areas of life manifesting in cultural barriers and also affecting other aspects of the social fabric like matrimonial alliance!

The increasing diversity of the nation brings opportunities and challenges for healthcare providers, healthcare systems, and policymakers to create and deliver culturally competent services. Cultural competence is defined as the ability of providers and organizations to effectively deliver health care services that meet the social, cultural, and linguistic needs of patients. A culturally competent healthcare system can help improve health outcomes and quality of care and can contribute to the elimination of racial and ethnic health disparities. Today strategies skewered to move the health care system towards these goals include providing relevant training on cultural competence and cross-cultural issues to health professionals and creating policies that reduce diagnostic and cultural barriers to patient care.

At Cipla, we rose to the challenge by plunging into a ‘barrier-breaking campaign that attacks the root of the disease- ignorance that is currently rampant in fatal quantities. Berok Zindagi is a multi-channel communication arsenal that is aimed at eliminating the myths and reinstating the fact that asthma need not come in your way.

Because after all, cultural competence and therapeutic competence really go hand in hand.

Hopefully one day, blessed amulets and fish stuffed down the throat will give way to inhalation as an integral part of an asthmatic’s life.

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Campus To Corporate

This is the time of the year when graduates from technical and business schools join organizations across India. Often referred to as Graduate Engineering Trainees, Management Trainees, Post Graduate Trainees etc., this is a key transition that these youngsters are going through in their lives.

While they are taking a plunge into the world of work from the world of academia, learning is hardly over. While learning will be a life-long process, considering the nature of the transition, their learning over the initial few months at work will be both intense and immense. They need to learn about the organization, its culture and practices, the industry and the sector, the domain and skills associated with it, tools and processes that are followed as well as skills associated with work and personal effectiveness.

Here are some pointers on how they can learn the maximum and handle this transition effectively. Let me start with certain mindsets that they need to bring in.

I am a part of the whole – unlike student days wherein what one does impacts just their performance (my poor scores may not impact anyone else), in an organization, one is always a part of the larger ecosystem, a team. If I don’t do my bit, it is going to impact others’ performance as well. That is a big responsibility that one needs to be aware of always.

I am observed and assessed all the time – there are no periodical or term-end assessments to determine one’s knowledge and skill. Rather, one is observed on a continuous basis and impressions are formed. And all this will feed into evaluation. And it’s not just knowledge and skill, but more importantly behaviour – whether you are on time for meetings, how and what you speak etc that gets observed. In a way, every day is an assessment day

I am an equal employee – there is no teacher and student; the trainee is as much responsible as a very seasoned employee and needs to take the effort and initiative. One cannot wait for instructions and directions always

These mindsets can set the right context after which they can do the following to actively learn.

Pull learning – Unlike in college, learning will not be pushed always through a standard curriculum, sessions etc. One needs to set his / her own agenda – a personal learning plan – and leverage resources. For eg. one may want to start by learning about the industry and check for all possible online and offline resources that can help with that. Like everyone else they need to own their learning and get into a self-learning mode

Learn on-the-job – this is the most potent source of learning. As per the well-known 70:20:10 model, 70% learning happens on the job. However, this does not happen automatically just because one is at the job. One should plan it, seek it and consolidate it. At the start of the day, the youngster (and everyone else as well) should plan not just the activities but the learning aligned to it. And then seek that actively, through experience and more importantly through interactions. For eg. assuming the trainee is present along with the manager in a negotiation with a vendor, a 5 – 10 minutes discussion post that with the manager saying why did you do this, what model were you following, share a little more etc would help.

Reflection and consolidation at the end of the day would be very important to crystallize and sustain the learning. To quote John Dewey,

“We do not learn from experience… we learn from reflecting on experience.” 

An online journal can be a good aid to jot down one’s reflections.

Seek a mentor – Mentor at this stage can be a huge developmental support. Mentor can be from within the organization or outside – a professor from one’s college, a senior from the institute etc. The mentor will not just act as a sounding board but can share perspectives and guide the trainee. I recollect my initial days as a school counsellor post college, when I used to travel from one end of the city to the other to interact with my mentor, who was couple of years my senior. Her guidance helped me in a big way to succeed in my initial years.

Form a PLN – PLN or a Personal Learning Network is another powerful source of learning. This enables Social Learning through sharing and collaboration amongst peers. Any online social collaboration platform can be the medium for this. While digital interactions are very much a part of our lives, the core purpose of a PLN would be sharing around learning. PLNs can be formed within the organization, say all trainees from a batch as well as outside, PLN of one’s batchmates across different organizations. Through external PLNs, I have often found that trainees are a very good source of information about external practices.

Gain the maximum out of formal training – One cannot ignore formal training. Starting with the induction / on-boarding programme that they would be a part of, trainees should take maximum advantage of all formal learning opportunities that the organization provides. This would include leveraging online learning platforms that many organizations provide.

Do not be limited by micro learning – Micro learning is the in thing. Byte-sized, short modules is what everyone, not just youngsters, favour. While micro learning has its value, I am of the strong view that it cannot replace mega learning. While micro learning can drive breadth, it is mega learning that will drive depth. One needs to understand and appreciate the value of mega learning and leverage it accordingly.

While the trainees need to own this, one cannot undermine the role of line managers and HR. They need to act as enablers and facilitators and sensitize and support trainees in the learning journey.

Let me end this with a quote by Henry Ford –

“Anyone who stops learning is old, whether twenty or eighty. Anyone who keeps learning stays young”

Let us keep learning and stay young forever!!

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How Cipla’s Self-Learning And Continuous Learning Approach Is A Game-Changer

Learnability is the biggest skill one can possess in the hyper-dynamic times that we exist in. There is a need for people to quickly learn and unlearn, and re-invent themselves if they seek to survive in the professional arena. At the same time, owing to how automation and technology are changing the nature of jobs, even organisations need to focus on continuously adding to the knowledge and skills of their people to stop them from becoming redundant. Gone are the days when learning and development were seen as a cost burden. It has now become essential for businesses that seek to sustain and grow in the existing volatile business scenario.

Cipla has been transforming its approach towards learning through focused efforts by its learning and development arm, Cipla University. In line with its philosophy of continuous learning, Cipla University believes in offering best-in-class training while promoting continuous learning that would enable all its associates as well as the organization on the whole Learn-Excel-Grow in a regular manner. This would not just lead to performance excellence in the present, but more importantly make individuals and the organization, future ready as well.

Hemalakshmi Raju, head- learning and development, Cipla says, “It’s not knowledge but a continuous learning approach that provides a competitive advantage.”

Raju shares that the organisation observed that there was a hunger for learning, and people needed guidance to be more efficient at what they do. More so, as the sales representatives in the pharmaceutical industry are mostly on the field and spend a significant amount of time, on-the-go. In addition, they have to deal with people who are way more qualified than them — the doctors. Even more challenging is the fact that their interaction window is limited to a few minutes versus the wait time that may be an hour or more.

It’s not knowledge but a continuous learning approach that provides a competitive advantage.

“Keeping all these challenges in mind, we realised that the field force required learning on the go such that they have anytime, anywhere access to relevant content. We launched mobile learning for the field force, a year ago. It allows them to utilise their wait time for learning, along with constant self-assessment on the same,” Raju explains.

The Company follows the 70:20:10 principle for its learning initiatives, and focuses majorly on continuous learning and self-learning. It has a unique programme called ‘Keep educating yourself’, under which it has provided its people access to a set of curated MOOCs. ‘My learning challenge’ is another unique initiative, that was organized sometime back, wherein employees could enroll themselves, pick a topic of their choice and spend at least half an hour every day, for ten days, learning the same.

Raju shares that over 250 people had enrolled for this programme across the globe, of which the best 10 were selected as learning champions. “The idea behind all these initiatives has been to inculcate in our people a habit of learning on their own,” Raju opines.

Cipla recently organised a learning expo at its office in Mumbai, with an aim to encourage self-learning and learning on the go. The event attempted to sensitise people and orient them to utilise various tools for self-learning through gamification.

Raju shares that the buy-in from the top management towards these digital learning efforts is extremely high and Cipla’s CEO, Umang Vohra and group chief people officer, Prabir Jha are strong proponents and ambassadors of the same

Looking ahead, Cipla is planning to organise social-learning drives, through digital platforms. It will include strong peer-to-peer learning through ‘tag and learn’ initiatives.

“Learning is not just about individual capability building but organisational capacity building” is a strong perspective held by Jha and Raju feels that Learning On the Go will be a key lever in bringing this alive.

This article originally appeared in HR Katha.

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Innoventia – Search For Disruptive Innovation in Healthcare

Keeping up with Cipla’s innovation-driven credo, happy to share one of our big initiatives towards the same. Check out Innoventia.Cipla.Com to participate & reinvent the way we deliver healthcare.

I take this opportunity to also write my thoughts on why an initiative like Innoventia is much needed in our times.

They say when data is tortured enough, it will confess to anything! This couldn’t ring truer than now- when ‘sharing’ has become a way of life, thanks to the digital takeover of our lives. Everything is under the impact of the fastest moving phenomenon in recent times: CHANGE. In fact, change is the new technology, permeating everything, especially healthcare.


We are already witnessing applications for blockchain and more uses for AI, especially in diagnosis. Analytics has become the new buzzword. In the broad sweep of AI’s current worldly ambitions, machine learning healthcare applications seem to top the list for funding. Clearly, healthcare is no longer about the passive delivery of diagnostics, drugs and infrastructure. Guess why?

Along with the diseases, patients are changing too – across the spectrum of understanding, knowledge, and management of diseases given the emerging technology canvas.

So what’s next? Innovation is the only answer – to tide this wave of life-altering times to transform the delivery of care.

Therefore, is it healthcare or tech care? A question that will perhaps be answered through the lens of innovation.

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