Small advisories are flavour of big M&A deals

Amrita Nair-Ghaswalla
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Corporates are increasingly seeking the advice of niche advisory boutiques for mergers and acquisitions. The Lafarge-Holcim merger, set to create a company with a market value of around $50 billion, has turned the spotlight on boutique advisory firm Zaoui & Company, which incidentally helped Lakshmi Mittal in his takeover battle with Arcelor in 2006.

Sun Pharma had deliberated the Ranbaxy buy with smaller, specialised agencies for some time, though Citigroup and Evercore Partners ultimately advised the drug major on its $4-billion buy.

Turning to small agencies is not a new phenomenon. In 2008, when Ranbaxy wanted to cash out with a $4.6-billion transaction with Japan's third largest drugmaker, Daiichi Sankyo, a relatively unknown boutique firm, MP Advisors, helped sew up the deal.

In 1997, MP Advisors was also instrumental in advising Sun Pharma’s Dilip Shanghvi on the firm’s first acquisition in the US, Detroit-based Caraco Pharmaceutical, for $7.5 million. The deal was valued at 9.3 times the sales, Tarun Shah, founder of the advisory, told Business Line. Subsequently, the agency put through several smaller buys.

Shah, who is close to Shanghvi, said that the Ranbaxy buy was “very much on the agenda at Sun Pharma. Dilipbhai had discussed the Ranbaxy buy way back in 2012. He was aware that Daiichi Sankyo would need to get out of the sticky situation”.

Creative thinking

“There are a lot of synergies that speciality firms bring to the table that bigger investment bankers do not. Bigger firms tend to get bogged down with regulatory filings and bureaucracy. I am not saying they are not intelligent, but there is no creative thinking involved,” Shah added.

With smaller agencies, “intellectually, it becomes a complete discussion”, he added.

In the Lafarge-Holcim merger, boutique firm Zaoui & Co teamed up with investment banker Rothschild to advise Lafarge, while Goldman Sachs advised Holcim.

At the time of the Arcelor deal, brothers Michael and Yoel Zaoui of Zaoui & Co were on opposite sides of the table. Officials said that by bringing the brothers to negotiate the Lafarge-Holcim deal, the trend to seek advice from niche agencies has been highlighted once again.

The Mittal victory had an unusual feature.

BlackBerry play

The deal brought the BlackBerry into play. Mittal’s battle reflected a significant cultural shift, and signalled “the BlackBerry’s coming of age as a key communications tool. While Mittal’s team knew what was going on all the time, Arcelor officials were deliberating with one another via the fixed phone (land line),” an official in the know of things said.

Though the Lafarge-Holcim merger promises a new mix in the cement industry, more sell-outs, as envisaged by Lafarge CEO Bruno Lafont, could well set the stage for boutique advisory firms to show their mettle again.

(This article was published on April 10, 2014)
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Union Budget 2014-15 Highlights

  • Following are the highlights of the Union Budget 2014-15 presented by Finance Minister Arun Jaitley in Parliament on July 10, 2014
  • Income-tax exemption limit raised by Rs 50,000 to Rs 2.5 lakh and for senior citizens to Rs 3 lakh
  • Exemption limit for investment in financial instruments under 80C raised to Rs 1.5 lakh from Rs 1 lakh.
  • Investment limit in PPF raised to Rs 1.5 lakh from Rs 1 lakh
  • Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh.
  • Committee to look into all fresh tax demands for indirect transfer of assets in wake of retrospective tax amendments of 2012
  • Fiscal deficit target retained at 4.1% of GDP for current fiscal and 3.6% in FY 16
  • Rs 150 crore allocated for increasing safety of women in large cities
  • LCD, LED TV become cheaper
  • Cigarettes, pan masala, tobacco, aerated drinks become costlier
  • 5 IIMs to be opened in HP, Punjab, Bihar, Odisha and Rajasthan
  • 5 more IITs in Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala.
  • 4 more AIIMS like institutions to come up in AP, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP
  • Govt proposes to launch Digital India’ programme to ensure broad band connectivity at village level
  • National Rural Internet and Technology Mission for services in villages and schools, training in IT skills proposed
  • Rs 100 cr scheme to support about 600 new and existing Community Radio Stations
  • Rs 100 cr for metro projects in Lucknow and Ahmedabad
  • Govt expects Rs 9.77 lakh crore revenue crore from taxes
  • Govt’s plan expenditure pegged at Rs 5.75 lakh crore and non-Plan at Rs 12.19 lakh crore.
  • Rs 2,037 crore set aside for Integrated Ganga Conservation Mission called ‘Namami Gange’
  • Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover to be launched
  • FDI limit to be hiked to 49% pc in defence, insurance
  • Disinvestment target fixed at Rs 58,425 crore
  • Gross borrowings pegged at Rs 6 lakh crore
  • Contours of GST to be finalised this fiscal; Govt to look into DTC proposal.
  • ‘Pandit Madan Mohan Malviya New Teachers Training Programme’ launched with initial sum of Rs 500 crore
  • Govt provides Rs 500 crore for rehabilitation of displaced Kashmiri migrants
  • Set aside Rs 11,200 crore for PSU banks capitalisation
  • Govt in favour of consolidation of PSU banks
  • Govt considering giving greater autonomy to PSU banks while making them accountable
  • Rs 7,060 crore for setting up 100 Smart Cities
  • A project on the river Ganga called ‘Jal Marg Vikas’ for inland waterways between Allahabad and Haldia; Rs 4,200 crore set aside for the purpose.
  • Govt proposes Ultra Modern Super Critical Coal Based Thermal Power Technology
  • Expenditure management commission to be setup; will look into food and fertilizer subsides
  • Impasse in coal sector will be resolved; coal will be provided to power plants already commissioned or to be commissioned by March 2015
  • Long term capial gains tax for mutual funds doubled to 20%; lock-in period increased to 3 years
  • Rs 4,000 cr set aside to increase flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.
  • EPFO to launch the ‘Uniform Account Number’ service to facilitate portability of Provident Fund accounts
  • Mandatory wage ceiling of subscription to EPS (Employee Pension Scheme) raised from Rs 6,500 to Rs 15,000
  • Minimum pension increased to Rs 1,000 per month
  • Union Budget 2014: List of products getting cheaper/ costlier

  • Finance Minister Arun Jaitley today spared the common man from price hikes by keeping duties on commonly used day-to-day items unchanged but made it costlier for smokers and tobacco consumers with a steep increase in excise rate in tax proposals in Budget 2014—15.
  • Following is a list of what will be cheaper and costlier:
  • CRT television
  • LED/LCD TVs especially below 19 inch
  • Footwear priced between Rs 500 to Rs 1,000 per pair
  • Soaps
  • E—book readers
  • Desktop, laptops and tablets
  • RO based water purifiers
  • LED Lights, fixtures and lamps
  • Pre forms of precious and semi—precious stones
  • Sports Gloves
  • Branded petrol
  • Matchbox
  • Life micro insurance policies
  • HIV/AIDS drugs and diagnostic kits
  • DDT insecticides
  • Cigarettes
  • Aerated drinks with sugar
  • Pan masala
  • Gutka and chewing tobacco
  • Jarda scented tobacco
  • Radio Taxi
  • Imported electronic products
  • Portable X—ray machines
  • Half cut/broken diamonds.


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