Us Bound Acquisition By Indian Companies March 2009

1. Vol. 2.1 March 09
US-BOUND ACQUISITIONS BY
INDIAN COMPANIES
Analysis of 2009 and 2008 Transactions
March 9, 2009
VIRTUS GLOBAL PARTNERS
VG
The Graybar Building, 420 Lexington Avenue, Suite 300, New York, NY 10170
www.virtusglobal.com

2. US-BOUND ACQUISITIONS BY INDIAN COMPANIES
US- March 2009
Pace of US-bound Deals Slows
eals
US-
KEY HIGHLIGHTS
Down
A sharp decline in growth projections, lack of
A sharp decline in growth projections, lack of acquisition financing, and a decrease in overseas
demand with the global economic recession has
acquisition financing, and a decrease in overseas
caused Indian companies to put brakes on their
demand with the global economic recession has global growth plans. There were only three US-bound
transactions year-to-date as compared to 12
caused Indian companies to put brakes on their
transactions in the same period last year. This
global growth plans. Even with Sterlite’s acquisition included Sterlite’s acquisition of Asarco for $1.7
of Asarco for $1.7 billion announced on March 8th, billion.
there were only three US-bound transactions year- In 2008, Indian companies accounted for a total of 62
US-bound acquisitions with a cumulative transaction
to-date as compared to 12 transactions in the same
value of over $3.4 billion. This represents a 25%
period last year. Sterlite’s acquisition represents a decrease over the 83 transactions in 2007 and a 66%
decline in terms of transaction value.
discount of $1 billion over the initial offer in May
Mega-size deals in 2008 included Tata Chemicals’
2008, and was driven by devaluation of mining
acquisition of General Chemicals for $1 billion and
assets and a sharp fall in copper prices. The other GMR Energy’s purchase of 50% equity in Intergen for
$1.1 billion.
transactions in 2009 were Piramal Healthcare’s
IT/ITES remains the most acquisitive industry
acquisition of Inhalation Anesthetic Gas Allocation
capturing over 55% share of the total US-bound
Division of RxElite and Cosmo Film’s acquisition of transactions by volume, followed by healthcare
GB Commercial Print Finishing Business. (15%); manufacturing, media and real estate (5%
each); and agriculture and mining (3% each). Other
industries accounted for less than 2% each in terms
of volume.
2008
Summary of 2008 Transactions
Deal sizes of less than $25 million accounted for 76%
With 62 transactions in 2008 totaling over $3.4 of the 2008 US-bound acquisitions by volume,
followed by transactions in the $25 to $50 million
billion in value, US-bound acquisitions by Indian
range (12%). This reflects the increasing pressure to
companies decreased 25% in volume and 65% in gain scale amongst smaller companies.
transaction value over the year 2007. Deep recession Most transactions involved acquisition of 100% stock
for cash consideration. These transactions generally
in the US, lack of acquisition funding and an
had an earn-out structure, where a portion of the
uncertain economic environment had a major impact deal value is paid on future milestones.
on Indian companies acquiring US-based companies.
Chemicals
90
Education 83
3%
Agricultural Energy
1%
3% 1% Engineering 80
2%
70
Finance 62
2%
60
48
50
Healthcare
14%
40
Technology Jewelry 30 23
55% 2%
20
Manufacturing
5%
10
Media
5% 0
Packaging
2%
Real Estate 2005 2006 2007 2008
5%
US-bound Transactions 2005 - 2008
Industry Breakdown of US-bound Transactions in 2008
PAGE 1

3. US-BOUND ACQUISITIONS BY INDIAN COMPANIES
US- March 2009
Breakdown of Transactions by
Key Industries
Information Technology/ ITES
With 34 US-bound acquisitions in 2008, information
technology was the most acquisitive industry in
India. The IT industry accounted for over 55% of the
US-bound transactions by volume. Within this
industry, healthcare, enterprise resource planning,
and analytics sub-segments were attractive for
acquisitions, given their untapped opportunities in
the US market. While mid-size companies, such as Acquisitions of Regulus by 3i Infotech and TUSC by
Mascon Global and Rolta sought to add new service Rolta highlight the increased attractiveness of
capabilities through US-bound acquisitions, large- financial services and enterprise resource planning
size companies, such as Aegis BPO and 3i Infotech sub-segments in the US.
sought to strengthen their current capabilities.
2008 - Key Transactions in IT/ITES ($mm)
Buyer Seller Size
The high rate of US-bound acquisition activity was Aegis BPO Services, Ltd. PeopleSupport, Inc.
propelled by the need to gain scale in terms of 249.59
3i Infotech, Ltd. Regulus Group, LLC
size, product offerings, and geography. The 2008 100.0
Satyam Computer Caterpillar- Market
US-bound acquisitions also demonstrated an
Services, Ltd. Research and Analytics 60.0
underlying business model change - from a cost- Operations
centric approach to a profit-margin focus. Mascon Global, Ltd. Jass & Associates, Inc.
and SDG Corporation 55.0
Rolta India, Ltd. Rolta TUSC, Inc.
Indian services providers have established 45.0
HCL Technologies, Ltd. CapitalStream, Inc.
themselves as competent providers of lower
40.0
margin services, such as software maintenance, Satyam Computer Bridge Strategy Group,
Services, Ltd. LLC 35.0
payroll processing, and call center management.
Mascon Global, Ltd. MGL Finance
Indian IT and ITES companies are climbing up the 35.0
value chain by focusing on software development,
project management, technology consulting, and
Transactions:
Healthcare Transactions:
enterprise software implementation.
The life sciences industry captured 15% of the
This is evident in HCL’s acquisition of
CapitalStream for $40 million. Similarly, Mascon’s transaction volume with nine US-bound acquisitions
acquisitions are targeted at getting entry into in 2008. Dr. Reddy’s Laboratories’ acquisition of
clients, such as Cisco and General Electric, as well BASF’s contract manufacturing facilities and
as developing their financial services capabilities. Maneesh Life Science’s acquisition of Synovics Life
Sciences was not only about gaining market access
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4. US-BOUND ACQUISITIONS BY INDIAN COMPANIES
US- March 2009
Chemicals one of the largest soda ash producers
worldwide. This acquisition provides a global
footprint to Tata Chemicals through access to North
America, Latin America, and the Far East. It also
lowers the cost of production and creates a hedge
against the commodity cycle given that over 50% of
its combined capacity is derived through natural
process.
2008 - Key Transactions in Chemicals ($mm)
in the US but also accessing firm-specific strategic
Buyer Seller Size
assets, such as internationally certified Tata Chemicals, Ltd. General Chemical
Industrial Products Inc. 1,005.0
manufacturing facilities, new products, research
RFCL Limited Mallinckrodt Baker, Inc.
capabilities, brands, and benefiting from operating 340.0
synergies.
Other Industries
As a target location, the US has traditionally lagged
behind Europe in pharmaceutical
outbound With two US-bound acquisitions in the last six
acquisitions from India. This could change based on months, Advanta has positioned itself as a global
the upcoming generic opportunities and size of the agricultural products company. These acquisitions
US market. Relying on third party marketing agents enhanced Advanta's capability to service customers
may not be a good strategy in the long run, thus, in the US and Canadian markets, as well as provide a
Indian companies are expected to acquire export- broader product base such as sunflower seeds and
sorghum-based products.
supporting networks in the US.
In the field of manufacturing, Everest Kanto acquired
2008 - Key Transactions in Healthcare ($mm)
Buyer Seller Size CP Industries, a manufacturer of large seamless
Dr. Reddy's Laboratories, BASF Chemicals
pressure vessels for the containment and
Ltd. Company, Ltd., 39.8
Pharmaceutical Contract
transportation of pressurized gases while Crompton
Manufacturing Business
Greaves acquired a provider of electrical substation,
and Related Facility
transmission line, collection system engineering,
Piramal Healthcare, Ltd. Minrad International, Inc.
(AMEX:BUF) 38.53 equipment packages, and construction services.
EID – Parry, Ltd. Valensa International
9.0
Chemicals
While mid-size companies in India were taking a
cautious approach to the global slowdown, well-
capitalized large-size Indian companies, such as
Tata Chemicals and RFCL took advantage of
relatively low valuations in the US market to
strengthen their global positions. The acquisition of
General Chemicals for $1 billion makes Tata
PAGE 3

5. US-BOUND ACQUISITIONS BY INDIAN COMPANIES
US- March 2009
Cross Border Acquisitions in the US: Key Considerations
Quantitative
Quantitative M&A Considerations Qualitative M&A Considerations
As the acquisition strategy is being developed, Several qualitative issues can influence the success
consideration should be given to the financial impact or failure rate of the acquired company within the
that a poorly constructed and integrated deal can organization and should be taken into consideration
have on the acquiring company. during the early planning phase.
Valuation – Market comparables, Free Cash Flow Developing Acquisition Criteria – Having a clear
analysis, Synergy Valuation, and Earning Power strategic need and acquisition criteria, as well as
should all be considered when valuing an analyzing the likely impact of an acquisition will
acquisition target. help set a robust selection process.
Integration Costs – Depending on the level of – Advisors with prior
Selecting Advisors
alignment, integration costs can be substantial. experience in US-based acquisitions and an
Sales/Revenue dis-synergies can occur as the understanding of the market will ensure a
overall deal process tends to distract key smooth navigation through the acquisition
stakeholders during the due diligence and M&A process.
integration process.
Legal
Legal & Regulatory – A major aspect in cross-
Due Diligence – Comprehensive due diligence border acquisitions is the thorough legal and
determines synergy value and uncovers potential regulatory analysis of a transaction. A well-
issues. US-based companies generally have good planned approach to managing contingent
management information systems, which create liabilities and contract issues is essential.
fast information flow.
Financing – Having financing in place during the
acquisition process increases the chance of a
successful transaction. Financing can be through
a combination of internal accruals and debt/
equity financing.
Acquisition Structure – While multiple factors
need to be considered for determining the
acquisition structure, jurisdiction, tax incidence,
accounting, access to funds and local regulations
are the most important factors. Generally, US-
bound acquisition structures include an earn-out
clause where a portion of the value is to be paid
over a period of time based on milestones.
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6. US-BOUND ACQUISITIONS BY INDIAN COMPANIES
US- March 2009
About Virtus Global Partners
Virtus Global Partners is a cross-border investment We provide a full range of investment banking
and advisory firm with focus on US and India-based services, including:
transactions. We have expertise in several core
Cross Border Mergers & Acquisitions
industries, including Information Technology, IT-
Fund Advisory
Enabled Services, Pharmaceuticals, Industrials, Auto
Strategic Partnerships & Joint Ventures
Ancillary, and Textile. We help Indian companies
India and US Entry Strategy Consulting
with US-based business development and strategic
entry For more information, visit our website
alliances and US companies with India
strategies. Our clients include mid to large-size www.virtusglobal.com or contact Anil Kumar,
Managing Director at akumar@virtusglobal.com.
akumar@virtusglobal.com
companies and private equity firms.
Key Transactions:
has secured senior
credit and second-
lien financing
Advisor to Ultra
Disclaimer
Disclaimer
The information contained in this document is a compilation of public domain data and internal research. Our findings are based on
information available as of March 9, 2009. Virtus Global Partners does not guarantee the accuracy or completeness of any
information contained in this document. Recommendations rendered in this report are not binding. Any decision or action taken by
the recipient based on this report shall be solely and entirely at the risk of the recipient.
PAGE 5

7. US-BOUND ACQUISITIONS BY INDIAN COMPANIES
US- March 2009
List of US-bound Acquisitions by US Companies in 2008
Tx Value
Date Industry Buyer Target ($m)
9-Jan-08 Technology IQMS Software Ltd (BSE:532379) Tractel Solutions Inc. -
21-Jan-08 Technology Satyam Computer Services Ltd. Bridge Strategy Group LLC
(BSE:500376) 35.0
22-Jan-08 Technology Rolta India Ltd. (BSE:500366) Rolta TUSC, Inc.
45.0
31-Jan-08 Chemicals Tata Chemicals Ltd. (BSE:500770) General Chemical Industrial Products Inc.
1,005.0
31-Jan-08 Technology Pradot Technologies Private Limited GROUPONE Healthsource -
18-Feb-08 Manufacturing Everest Kanto Cylinder Ltd. (BSE:532684) CP Industries, Inc.
66.3
20-Feb-08 Technology HCL Technologies Ltd. (BSE:532281) CapitalStream, Inc.
40.0
3-Mar-08 Agricultural Advanta India Ltd. (BSE:532840) Garrison & Townsend, L.P.
10.5
3-Mar-08 Technology Aurionpro Solutions Limited (BSE:532668) SENA Systems, Inc.
2.81
11-Mar-08 Technology Mascon Global Ltd (BSE:531131) Jass & Associates, Inc. and SDG Corporation
55.0
13-Mar-08 Media Cyber Media (India) Ltd. (BSE:532640) The TDA Group -
18-Mar-08 Technology PreMedia Global, Inc. GGS Book Services -
27-Mar-08 Technology IBS Software Services (P) Ltd. Hotel Booking Solutions Incorporated -
1-Apr-08 Technology Accentia Technologies, Ltd. (BSE:531897) Oak Technologies Inc.
4.0
1-Apr-08 Manufacturing The Sanmar Group Matrix Metals LLC -
4-Apr-08 Media Reliance BIG Entertainment Private Limited DTS Digital Images
7.5
4-Apr-08 Technology Cyber Media (India) Ltd. (BSE:532640) CMP-CyberMedia LLC -
14-Apr-08 Media Valuable Technologies Pvt. Ltd. MovieBeam Inc.
2.3
21-Apr-08 Technology Satyam Computer Services Ltd. Caterpillar- Market Research and Analytics
(BSE:500376) Operations 60.0
28-Apr-08 Technology 3i Infotech, Ltd. (BSE:532628) Regulus Group, LLC
100.0
29-Apr-08 Healthcare Dr. Reddy's Laboratories Ltd. (BSE:500124) BASF Chemicals Company Ltd., Pharmaceutical
Contract Manufacturing Business and Related 39.8
Facility
14-May-08 Technology Mascon Global Ltd (BSE:531131) MGL Finance
35.0
20-May-08 Technology Educomp Solutions Limited (BSE:532696) The Learning Internet, Inc.
24.5
26-May-08 Finance o3 Capital Advisors Pvt. Ltd. Wolet Capital Corporation -
9-Jun-08 Healthcare Protech Biosystems Pvt. Ltd. SFH I Acquisition Corp. -
17-Jun-08 Technology MosChip Semiconductor (BSE:532407) Indigita Corporation -
18-Jun-08 Healthcare Maneesh Pharmaceuticals Pvt. Ltd. Synovics Pharmaceuticals, Inc. (OTCBB:SYVC) -
19-Jun-08 Healthcare Intas Biopharmaceuticals Ltd. Biologics Process Development, Inc. -
20-Jun-08 Agricultural Advanta India Ltd. (BSE:532840) Limagrain Verneuil Holding, US Sunflower Business -
24-Jun-08 Energy GMR Energy Limited InterGen, Inc.
1,100.0
2-Jul-08 Technology Wipro Technologies Ltd. Wipro Gallagher Solutions, Inc. -
8-Jul-08 Technology Allied Digital Services Ltd. (BSE:532875) Premier BPO, Inc.
24.24
8-Jul-08 Engineering Foster Wheeler Quotient Engineering, Inc. -
17-Jul-08 Technology Kaashyap Technologies Limited NexAge Technologies USA Inc.
(BSE:532283) 3.0
17-Jul-08 Technology Kaashyap Technologies Limited Enterprise Consulting Services, Inc.
(BSE:532283) 1.0
18-Jul-08 Packaging Bilcare Ltd. (BSE:526853) International Labs, Inc. -
30-Jul-08 Technology Ontrack Systems Ltd. (BSE:532607) IQ Technologies LLC -
3-Aug-08 Technology Aegis BPO Services Ltd. PeopleSupport Inc.
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8. US-BOUND ACQUISITIONS BY INDIAN COMPANIES
US- March 2009
249.59
22-Aug-08 Technology Take Solutions Ltd. (BSE:532890) Applied Clinical Intelligence, LLC -
22-Aug-08 Technology N.S Infotech Pvt. Ltd. Telfonix Medical Consulting, Inc. -
25-Aug-08 Technology HCL Technologies Ltd. (BSE:532281) Control Point Solutions, Inc. -
31-Aug-08 Healthcare Actis Biologics Private Ltd. CellPoint Diagnostics Cancer Drug Discovery Assets -
2-Sep-08 Chemicals RFCL Limited Mallinckrodt Baker, Inc.
340.0
7-Sep-08 Technology Reliance BIG Entertainment Private Limited Willow TV, Inc. -
11-Sep-08 Technology QAI Global Institute The Quality Assurance Institute, Inc. -
15-Sep-08 Manufacturing Crompton Greaves Ltd. (BSE:500093) MSE Power Systems, Inc.
16.0
15-Sep-08 Technology Ranklin Solutions Ltd. (BSE:590077) Cigniti, Inc. -
19-Sep-08 Jewelry Dynamix Jewelry Group JewelAmerica, Inc. -
30-Sep-08 Technology Polaris Software Lab Ltd. (BSE:532254) SEEC, Inc. (OTCPK:SEEC) -
21-Oct-08 Technology Neilsoft Limited CADFORCE LLC -
28-Oct-08 Real Estate Embassy Group Ltd. The Lakes Apartments
24.43
28-Oct-08 Real Estate Embassy Group Ltd. The Loft Apartments
9.33
31-Oct-08 Real Estate Khanna Enterprises Ltd. Hotel Montgomery
12.4
3-Nov-08 Technology Zylog Systems Ltd. (BSE:532883) Fairfax Consulting Inc.
7.5
3-Nov-08 Technology Zylog Systems Ltd. (BSE:532883) PEQ Consulting Inc. -
10-Nov-08 Technology Ebix Software India Private Limited ConfirmNet Corporation
7.35
21-Nov-08 Healthcare EID - Parry Ltd. (BSE:500125) Valensa International
9.0
5-Dec-08 Education Manipal Education and Medical Group American University of Antigua -
17-Dec-08 Healthcare Cadila Healthcare Limited (BSE:532321) Zydus Pharmaceuticals (USA) Inc. -
22-Dec-08 Healthcare Vivimed Labs Ltd. (BSE:532660) Har-met International, Inc. -
22-Dec-08 Healthcare Piramal Healthcare Ltd. (BSE:500302) Minrad International Inc. (AMEX:BUF)
38.53
29-Dec-08 Technology Rolta India Ltd. (BSE:500366) PIOCON Technologies, Inc. -
*Source: CapitalIQ Database
PAGE 7