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UK Number One Destination For Indian Acquisitions

by Amanda Banks, for, London

28 July 2008

The UK is now the number one destination for overseas acquisitions by Indian companies, with the current strength of the UK/India business relationship offering some positive news against an increasingly gloomy domestic economic backdrop, according to new analysis by financial and business advisory firm, Grant Thornton.

Grant Thornton's newly launched India Watch research, which monitors the UK/India business relationship through both cross border M&A trends and the performance of Indian companies on the London Stock Exchange, found that Indian businesses are now spending more on buying businesses in the UK than in any other country.

The sale of Jaguar and Rover to Tata Motors helped to boost the total value of Indian acquisitions to GBP1.52bn in the first half of the year, compared with GBP930mn in the US, and GBP561mn in the Netherlands.

The US is still the number one destination by number of companies acquired, however, with 41 American businesses purchased by Indian companies in the first half of 2008, compared with 20 UK companies.

Anuj Chande, head of Grant Thornton's South Asia Group, suggested that the ongoing interest in UK companies by the Indian business community was a combination of historical ties, strong cross border business links and infrastructure, a very compatible business ethos and the fact that many UK firms' values have fallen.

In 1998 there were a total of 15 companies purchased offshore by Indian companies; in the first six months of this year there have already been 161 acquisitions.

"Indian businesses are looking primarily looking to buy brands and established distribution networks. If a UK brand with an international profile is looking for buyers, expect interest from acquisitive India companies. This is a nation forging ahead with buy-and-build on a massive scale," according to Chande, who worked on the Tata deal.

UK companies were also on the acquisition trail in India in the first part of 2008, with GBP487mn spent on 23 companies, although this is significantly down on last year's total, a record breaking GBP9.56bn in total UK acquisitions in India.

Deals included the acquisition of IL&FS Investsmart Ltd, a financial management firm, by HSBC Holdings Ltd for GBP123mn and Thomas Cook UK Ltd acquiring a majority shareholding in Thomas Cook (India) Ltd for GBP116mn.

Chande argued that there is also far greater potential yet for those cash rich UK firms that are willing to make international expansion a priority despite the current political and economic uncertainty faced by India at present, revealing that:

"Not only is the Indian economy racing but business infrastructure in India is catching up with this growth, with the depth of skills contained within the workforce as a whole continuing to attract foreign investment from around the globe."

Chande further stated that there is growing confidence in the Anglo-Indian business relationship, which has been strengthened by a variety of business delegations, trade events and through the groundwork completed on previous deals, but he also warned there are still a number of hurdles to be overcome by foreign companies aspiring to invest in India:

"The opportunities for UK companies are huge, but unless decision making is well-informed, India still holds many more M&A pitfalls than traditional markets such as Europe and the US," he concluded.

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