Gagan Bakshi of InterGlobe Enterprises delivers guest lecture at VGSoM IIT Kharagpur
| April 13,2012 02:49 pm IST
Mr Gagan Bakshi is a Director at InterGlobe Enterprises and is responsible for all merger and acquisitions related activities in existing lines of business and for developing InterGlobes diversification strategy. With over USD 2bn in annual revenues and about 10,000 employees, InterGlobe Enterprises has a network of 112 offices in over 55 cities globally.
It has significant presence in the fields of aviation and aviation management, travel related services, travel distribution services and IT & BPO services.
Mr. Gagan Bakshi visited VGSoM on March 31, 2012 as part of Vaarta - The Guest Lecture Series. Mr. Bakshi provided a detailed and panoramic view of various aspects of M&A and followed it up with a short session on Investment Banking.
Mr. Bakshi started his session by clarifying the distinction between a Merger and an Acquisition. He said, in the pure sense of the term, a merger happens when two firms agree to go forward as a single new company rather than remain separately owned and operated whereas, an acquisition is the purchase of one business or company by another company, which is usually larger. In reality most of the mergers are disguised acquisitions because one of the merger partner usually dominates the other, he added.
Mr. Bakshi then explained the dominant motives for embarking on the path of mergers and acquisitions. Broadly speaking, M&A drivers could be for increase in market power and customer acquisition, to overcome entry barriers, for diversification, for increased economies of scope and also to kill competition.
Comparing the approach of different companies towards M&A, he discussed five broad types. First, the Mountain climbing approach where the company gradually and consistently moves from acquiring small to large companies. Second approach is the Stringing Pearls approach, where companies acquire many smaller sized companies on a regular basis and create a portfolio of value added targets Thirdly, some companies Bet Small and buy frequently, and fourthly, the Roll the dice approach where companies buy infrequently and usually end up acquiring a large target in the midst of deal fever. The fifth approach of Playing Dead i.e. not participating in the M&A activity should also be considered as an active decision by the management. He summarized by pointing out that companies that got the best shareholder returns from M&A were the ones who bought smaller companies and acquired frequently.
Mr. Bakshi also talked about the most common methods followed for the valuation of a business before the actual merger. A few typical types discussed were asset valuation, future earnings valuation, relative valuation which includes comparable company & comparable transactions analysis, and Discounted Cash Flow (DCF) valuation. He pointed out the advantages and disadvantages of each methodology, and using anecdotes from his past experience as an investment banker, added a few practical tips on avoidance of common mistakes in valuation.
He also elucidated on the key ingredients for successful post merger integration and highlighted the post-merger strategy and management structure as the two most critical aspects. Some of the other key elements are leadership consolidation, vision and business philosophy alignment, cultural alignment, consolidation of business reporting and organization structure definition.
The former Vice President (Investment Banking) of Credit Suisse also gave an informative and witty description of a career in Investment Banking. Relying on his banking experience in New York, London and Mumbai, he walked through the various steps of a buy-side and a sell-side M&A deal and pointed out unique aspects of the deal making in India. He explained how an investment bank is structured, the functions of its various arms such as Sales & Trading, Research, etc. For all those seeking careers in investment banking, he pointed out that I-banking is a great launch pad for ones career even if one plans to quit banking and switch careers later because of the huge learning experience in the initial years, which pans several business domains.
The session concluded with an engaging Q&A session about some of the recent M&A deals, the role of Competition Commission of India, peculiarity of the Indian M&A scenario and how to build an I-banking career.