The Hindu Business Line : Mid-cap cos tap ‘sub-prime’ opportunities in US

New Delhi, March 12 With the sub-prime meltdown knocking off profitability of firms in the US, opportunities are opening up for Indian mid-cap companies to acquire their counterparts in the US, especially those finding it difficult to meet working capital requirements as well as distressed assets being put on the block.

There has been an appreciable spurt in acquisitions abroad, especially in the US, by Indian mid-cap firms in the last few months and the trend is visible across sectors. The Bangalore-based Kavveri Telecom Products and Pradot Technologies Pvt Ltd, the Ahmedabad-based Azure Styx Infotech, the Hyderabad-based FXLabs Studios, the Indore-based Plethico Pharmaceuticals, the Aluva-based Kerala Ayurveda Ltd and the Vadodara-based Minal Jewels figure among the mid-cap firms that have bought out US companies post-November 2007.

Deal size

According to Virtus Global Partners’ estimates, deal sizes of less than $25 million accounted for 76 per cent of the US-bound acquisitions by volume in 2007, followed by transactions in the $25 million-50 million range ( eight per cent). “Deal sizes in the $50 m-100 m, $100 m-500 m, and greater $500 m range each accounted for less than six per cent of the 2007 transactions,” an analyst said.

Kavveri Telecom Products’ acquisition of Spotwave Wireless for $7 million in January 2008 offered it access to the intellectual property and fixed assets of the US firm.

Plethico Pharmaceuticals acquired Natrol Inc for $80.7 million in the same month to consolidate its position as a global player in herbal healthcare products.

Azure Styx Infotech picked up 49 per cent stake in Citizen Financial Mortgage for around $25 million in October 2007, while Kerala Ayurveda Ltd bought out Comprehensive Medical Staffing Inc.

Other deals

Among other deals, Pradot Technologies announced the acquisition of GroupOne Healthsource, a US-based full-service healthcare billing, technology and consulting company in end-January this year.

In February, Kaashyap Technologies acquired the New Jersey-based Logic Bytes Inc, which provides software solutions to many big and small business companies in the US. FXLabs Studios, video game developer, paid $3 million to acquire the California-based Interactive Media Technology, which owns casual gaming portal Knibble.com in December.

“There will be more acquisitions this year as the US market faces a slowdown,” said a market analyst.