UK becomes top location for acquisition by Indian firms: study

UK becomes top location for acquisition by Indian firms: study


New Delhi: The United Kingdoms has emerged as a prime location on India Inc’s global acquisition map with deals worth $1.2 billion taking place in the first six months of this year, a report says.

British firms, on the other hand, have also intensified their hunt for businesses in India and have already entered into acquisition deals worth $12.9 billion.

“The UK is set to be the number one acquirer of Indian businesses and also the prime acquisition target for Indian companies this year, and there is still a huge untapped potential in the subcontinent that UK firms are missing out on," a report by global financial adviser Grant Thornton said.

The acquisitions made by UK firms here have seen a jump of over 41 fold over last year’s deals valuing $310 million, while those entered into by Indian businesses in the UK has risen three-fold, the report said.

“Strong historical ties between the UK and India combined with the rapid growth experienced by the Indian economy had led to some very large deals, although there was still underlying weaknesses in the overall picture," Anuj Chande, International Business Partner and head of Grant Thornton’s South Asia Group said.

This year, so far, Indian firms valuing more than $14.5 billion were acquired by overseas buyers in 78 deals. Of this, UK-based Vodafone stole the show with the $10.9-billion acquisition of Essar from Hutchison Telecommunications International.

Barring this deal, the value of UK acquisitions is spread over a total of three deals.

In the first six months this year, Indian firms have spent $1.2 billion on UK-based companies against $332 million invested on acquisitions in the US, the report showed.

Over 119 international acquisitions were completed in 2006 by domestic firms, which have already made 63 deals in the first six months of the current year. Of these 63, seven were acquisition in the UK.

The lion’s share of India’s acquisition in the UK is of spirits giant UB Group which paid almost $1 billion for Scotch whisky distiller Whyte & Mackay.

This year’s international acquisition patterns have so far favoured raw materials, while the Essar deal in telecom sector led in terms of value.

However, there are certain reservations among European companies for investment and setting up operations in India, apparent from the fact that while UK acquired as many as 17 Indian companies in 2006, France acquired just seven, the report said.

“The UK is currently in a good position to capitalise economically on its strong historical and cultural links with India. I would recommend any business looking to expand internationally to have a serious investigation into acquisition prospects in India, as the economic forecast continues to look bright," Chande added.

However, there still remains a number of hurdles for foreign companies aspiring to invest in India, which include regulatory difficulties.

Last year, US firms bought most number of companies in India in deals worth $2.8 billion, followed by Mauritius and Malaysia. UK was at the fifth position, the report said.