Less of more vs more of less

Less of more vs more of less

Monday’s news-of-the-day was that Sunil Mittal’s Bharti Airtel and South African telco MTN had given themselves almost one more month to arrive at a deal.

A release put out by Bharti also seemed to hint that the deal would be sweetened further—inducement for the South African telco to push ahead.

Given MTN’s proclivity to play the runaway bride, the extension may be seen as another delaying tactic by the company. Or it could be seen as the home stretch for a rather complex deal-in-the-making.

There’s no certainty of how the talks between the two parties—as indeed, talks between any two engaged in a complex acquisition deal spanning geographies—will end. Nor is there any indication as to how Bharti will make the deal more attractive for MTN. Will it involve more cash? More stock? Maybe a bit more of both?

A stock inducement cannot be ruled out. Mittal, after all, has never hesitated to dilute his own stake in a company if the promised benefit is a larger company. The willingness to own a lesser stake in a larger company rather than a much larger stake in a much smaller company sets him apart from several other entrepreneurs whose desire for absolute control overwhelms almost everything else—even sound business logic.

In some ways, this reluctance is surprising because the benefits of letting go—even by a bit—are very visible in the case of companies that have sold shares, however few, to the public. The net worth of the promoters of these companies arises largely from the value of the stock they hold in the company. And it is the market that assigns a value to this stock.

Still, issues related to economic and management control are usually less about economic logic and more about how entrepreneurs and executives feel about letting go. And the truth is that the majority aren’t comfortable doing so. On that count, Mittal has shown himself to be ahead of the curve. Will that help him close the MTN deal?

Should promoters aim to own less of more than more of less? Tell us at views@livemint.com