Monday, November 12, 2012

Acquisition of foreign companies by IndianCorporates



 Although there has  been slow down  in wave of corporate  mergers and a proliferation of strategic partnerships among corporations in the past few  during the world economic crisis,  market concentration giving a few producers or suppliers an undue amount of influence of market continues to cause alarm. The annual value of corporate mergers has risen to a 100-fold during the past two decades, reaching a cumulating $15 trillion in 2006. 32,000 deals were announced in 2006 alone; triple the numerator a decade ago and more than 30 times in 1986. Mergers across national boundaries rose even more strongly than that of all mergers. While cross border mergers were typically below 20 percent of the value of all mergers in the early 1980s, today they constituted more than one-third in 2006. The member of cross-border deals valued at more than $ 1billion rose to100 in 2006 from just 39 in 1998. In fact, cross-border mergers have been the main driving force of foreign direct investment in recent years. This means that considerable position of private capital flows goes simply to changing ownership of existing factories and other business. While acquisitions imply a long-term investment commitment, most others imply little more than a procedure to asset-stripping–retaining the most valuable parts of company and closing or selling off other parts. Recent data indicate that such corporate mergers have instead of benefiting the people have meant to more concentration and market power which translates into political influence and reckoning of labour's bargaining power. Although there has been a significant decline in the number and volume of mergers and acquisitions, concentration of market and wealth continues to be a worrisome phenomenon.  Recently many Indian Corporations have resorted to acquisition of   foreign companies. It is not a good augury. When there is large-scale unemployment, especially among educated youth, it is unwise for Indian companies to invest huge amounts in acquiring assets abroad. When the government is going all out to woo  foreign direct investment even  against public sentiment and opposition from all quarters such as allowing 51% FDI in multi-brand retail trade,  it is unwise to allow Indian corporations to invest huge amount for acquisition of foreign assets.
Dr.C.Murukadas, The Times of India, Nov.8, 2012

No comments:

Post a Comment