Posts Tagged ‘Deal’
Mahindra – Satyam: What’s the Deal?
Tuesday, August 18th, 2009From the offset of 2009, the name ‘Satyam’ has been in the news lines of major business newspapers and TV channels. It all started off with the disclosure by Satyam’s founder and then Chairman Ramalinga Raju about the financial fraud did by him and his close colleagues. This scandal rocked the Indian IT business, which was already shattered by the recession and led to a steep decline at the stock market. The Government of India had appointed directors at the Satyam board to find a solution to end this scandal. Finally, Tech Mahindra -The IT arm of Mahindra & Mahindra emerged as the potential buyers of Satyam for $354 million (In 2008, Mr. Anand Mahindra – Vice Chairman of M&M had contacted Mr. Raju for a tie-up, but due to the lack of response from Raju, the alliance didn’t happen.)
There were several eyebrows raised when Mahindra acquired Satyam through the open bid. The primary concern was making the defamed organization a profitable one amid the slow down and merging it with Tech Mahindra. Tech Mahindra’s main intention behind this acquisition is to extend their portfolio beyond telecom. Tech Mahindra, a Joint venture between Mahindra and British Telecom, has 70 of their revenues from telecom and has a very good customer base in Europe. They wanted to extend their reach to US, where Satyam has a good Client base.
Satyam, on the other hand, is diversified: with customers’ in banking, financial services and insurance (BFSI), manufacturing, retail and healthcare sectors. Tech Mahindra sees this leverage, when they bid for lucrative projects like ERP, where Satyam has expertise. Though Satyam is calumniated with the corporate fraud, none of its clients have doubt in its ability to deliver. That has prompted Tech Mahindra to go for Satyam.
According to CP. Gurnani, the new CEO of Mahindra Satyam and Sanjay Karla, the CEO of Tech Mahindra; both these companies will bid together for projects to get the leverage of diverse portfolios rather than bidding against each other. Though a comprehensive merging doesn’t look apparent on the cards now, the partnership will catalyze the proposed merger in a couple of years. By that time Mahindra Satyam will re capture its erstwhile structure, which they had before the scandal.
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