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Another interesting trend that will further help Indian companies to restructure is role of private equity players. Most of the big names - from Blackstone, Carlyle, Warburg Pincus to Actis - are all drawing up their strategies for a larger share of the M&A pie. However, the results so far have been mixed, as economic performance of companies post M&A has not shown a substantial improvement.
What is helping companies to bid successfully for overseas buyouts is the financial backing from banks especially in the private sector. Acquisition funding by major players like ICICI Bank, Citi, Clayon, Deustche Bank and Standard Chartered has helped corporates manage loan burden post acquisition as banks provide flexible terms in tenor and security.

It would seem that selling off parts of the business can improve financial performance, but this is particularly the case if, as a result, the company gains in focus and the disposed-off asset is acquired by a company with a similar industry background, e.g., Grasim’s taking over the cement division of L&T. Spinning off divisions can also improve performance, particularly if another company subsequently acquires the spun-off division, and if the proceeds of these sales are used to reduce debt in the parent company or distribute dividends to the shareholders.

An "outsourcing" strategy is necessary to utilize outside players for non-core operational functions. Savings from outsourcing can be used for corporate restructuring. Global companies, which have outsourced, have done so not only to gain substantially from the cost savings but also to take advantage of the growth opportunities due to outsourcing. Here again a company may go in for completely outsourced business model or a partially outsourced model, which then alters their profit margins accordingly. Companies that are off-shoring are able to restructure as they can buy any function needed to run a company by tapping into global talent pool.

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* Contributed by: -
Aadarsh Himmatramka, an M.Com. from Mumbai University, worked as Marketing Asst. with Pentafab Textiles Pvt. Ltd. for a year and is currently a student of PGP1 at BIM, Trichy,
Article published in KRIYA, March 2006 Issue, BIM's monthly magazine.