Eyes wide shut
- Zimbabwe’s parliament starts impeachment process against Robert Mugabe
- Reliance Capital raises Rs2,500 crore from banks, financial institutions
- Myanmar operation against Rohingya has ‘hallmarks of ethnic cleansing’: US senators
- Xiaomi ties up with Hipad Technology to make power banks in India
- RINL’s IPO can be considered after it starts making profit: Steel minister
Deal makers are usually smart people who are also prone to hubris. The race to close a major deal often leads to hasty due diligence—and legal tangles later on.
Ranbaxy is a good example. An arbitration court last week asked the pharma company’s former promoters to pay $385 million to Daiichi Sankyo. The Japanese company had complained that it had not been told at the time of the deal about the incipient problems with the US regulators. And, in the liquor industry, Diageo hastily took control of United Spirits from Vijay Mallya. It was only later that the buyer got to know of the soft loans given to other struggling companies in the UB group.
These examples show that even global companies walk into attractive deals with their eyes wide shut. Buyers have to be more careful, but that does not exonerate other players in large corporate deals, such as investment bankers, auditors and the board of directors. What were they doing?