Placement Boot Camp – C11

Assignment – 03

Successful firms struggle with succession

Source: The Economist, May 5, 2011

IT’S a hard life on the top rungs of Infosys, the Indian

technology company that has symbolised the country’s
economic rebirth. “I worked Saturdays, Sundays, every
day 14 hours; just Infosys. I ignored my family; my poor
wife has been ignored, my children have grown up, they
will leave me and go and I will feel emptiness soon.” So
said a veteran executive as he announced his surprise
retirement last month. Yet for all that Infosys has found it
hard to escape the grip of its—presumably exhausted—
founders, seven of whom began the company in 1981
with $250 and turned it a global concern with a market
value today of $37 billion.
On April 30th, after weeks of speculation and bucketloads
of platitudes from the company about corporate
governance, it finally tried to put the succession question
to bed. It only partly succeeded. K.V. Kamath, a banker,
will be the first outsider to be chairman, replacing N.R.
Narayana Murthy. That seems clear enough. But the rest
of the succession looks muddled. The new chief executive
will be the fourth consecutive co-founder to hold that
post. The old chief executive, also a founder, will become
executive co-chairman, a title loaded with ambiguity,
while even Mr Murthy, the pre-eminent founder, will
linger under a new role as chairman emeritus.

The hope must be that Mr Kamath, who built ICICI,

India’s largest private bank, will be able to knock heads
together. Although his track record is not free of blemish
—ICICI suffered a wobble during the financial crisis in
2008—he is well qualified, a burly but eloquent character
with a strong vision about the role of technology in
society. That may reassure investors, who have sound
reasons to seek an infusion of new blood. India’s
technology firms seem to be maturing, with a
combination of fierce competition and rising wage costs
putting pressure on profits. Infosys expects its earnings
per share to grow by just 8-10% in dollar terms this
financial year, far below the growth rates it once achieved
(see chart).
In that respect, just as Infosys’s rise symbolised India’s
industrial renaissance, so its growing pains are
symptomatic of a common new ailment. After the boom
of recent years, most of the country’s big firms are far
more demanding to run than they were. Yet several state-
backed firms are currently without permanent chiefs, and
many private ones have veteran bosses who may soon
retire. No company exemplifies this more than the Tata
group, which seems to be struggling to find a successor to
Ratan Tata and may yet select a member of his family.
Other giants without a strong family influence, including
Larsen & Toubro, a big engineering concern, and ITC, a
cigarettes-to-greeting-cards conglomerate, must also
ponder replacements for their chairmen and, perhaps,
spruce up their boards. An obvious option is to bring in
independent heavyweights with successful careers at other
firms. Such individuals are in short supply, however.
Deepak Parekh, whose main job is chairing HDFC, a big
mortgage-finance firm, also heads the boards of no fewer
than four other firms and is a director of 12 more. Even
by the standards of Indian executives, he’s pretty busy.
Assignment: What did you learn from this article?
Word limit: 75-100
 The Competition Commission of India
Source: The Economic Times, May 13, 2011
The Competition Commission of India's (CCI) move to
dilute some of its original proposals to regulate corporate
mergers and acquisitions is welcome, but more needs to
be done, particularly with regard to the duration of the
regulatory process. Indian business operates in a
globalised environment and M&A regulation in India
cannot be dilatory, if Indian companies are not to be at a
competitive disadvantage.

The commission has said that it would attempt to pass an

order or issue direction within 180 days of filing of the
merger notice. But six months are far too long a period in
the life cycle of a transaction, particularly after companies
reach a definitive agreement to go ahead with an M&A
plan. Most developed country merger control regimes
give their firststage decision within 30 days, clearing the
way for most transactions to go ahead with closure. The
European and the US competition authorities normally
pronounce their final decisions even for complex
transactions within 90 days.
The regulations notified on Wednesday, to be effective
from June 1, too have built in two-stage clearance for
forming an opinion on combinations; prima facie opinion
on possible adverse effect on competition is to be made
within 30 days of the commission being informed of the
merger or acquisition plan. Ideally, CCI should be able to
give a clear indication on a transaction within that period.
And only complicated transactions should go into the
second stage of review. Agreements that have already
been entered into will not now be subject to scrutiny.
Filing fees have been lowered to a more reasonable Rs
50,000 -10 lakh from the earlier Rs 10-40 lakh.

Transactions that are in the ordinary course of business

such as acquisition of stock-in-trade, raw materials, bonus
issues, stock splits, combinations with insignificant nexus
with markets in India will not require pre-notification.
These relaxations notwithstanding, sections of industry
may continue to protest merger notification. The purpose
of competition laws is to protect the welfare of
consumers, shareholders and other stakeholders in a
business. And that purpose should reign supreme, in the
interest of the economy.

Ans: The competition commission of india (cci) perhaps

could not have imagined the interest it would stir when it
posted a new set of draft merger regulations. To
understand the importance of the changes to the final
merger regulations, it is useful to place some content of
the earlier draft in to perspective. The merger regulations
are the nuts & bolts of the merger control regime and
prescribe the ‘what’, ‘when’ and how of the merger
approval process .Another issue left un addressed in
previous drafts was the fate of m&a transactions under
way but unlikely to be concluded by pipeline mergers .
The merger regulations have clarified that only mergers
that have the board of directors ‘final approval’ or where
binding documents to give effect to the transaction
have been signed on will require notification .

A set of issues concerned the event that triggers the

notification requirement .
This
would impose a onerous filling requirement on
companies that could only be exploring a possible
merger ,and coul prove to be a dampner on m&a
activity .The CCI has addressed the issue by clarifying
that the notification requirement will be triggered only
once a ‘binding document’, which conveys the intention
to acquire, is signed or, in case of a hostile acquisition, a
document executed by the acquirer conveying on
intention to acquire control over the target will trigger
the notification requirement.
Ans: The competition commission of india (cci)
perhaps could not have imagined the interest it
would stir when it posted a new set of draft
merger regulations. To understand the importance
of the changes to the final merger regulations, it is
useful to place some content of the earlier draft in
to perspective. The merger regulations are the
nuts & bolts of the merger control regime and
prescribe the ‘what’, ‘when’ and how of the
merger approval process .Another issue left un
addressed in previous drafts was the fate of m&a
transactions under way but unlikely to be
concluded by pipeline mergers . The merger
regulations have clarified that only mergers that
have the board of directors ‘final approval’ or
where binding documents to give effect to the
transaction have been signed on will require
notification .

A set of issues concerned the event that triggers

the notification requirement .

This would impose a onerous filling requirement

on companies that could only be exploring a
possible merger ,and coul prove to be a dampner
on m&a activity .The CCI has addressed the issue
by clarifying that the notification requirement
will be triggered only once a ‘binding document’,
which conveys the intention to acquire, is signed
or, in case of a hostile acquisition, a document
executed by the acquirer conveying on intention
to acquire control over the target will trigger the
notification requirement.