'M&As are hard to come by in IT sect'

Aggressive mergers and acquisitions (M & A) are real challenges when it comes to IT sector, said Vedika Bhandarkar, managing director and head of investment banking, J P Morgan India Pvt Ltd.

Talking on the sidelines of 'The India Finance Forum 2005 conference' organised by CII, she said that very few IT companies had been able to do aggressive M & A. Indian IT services firms, by and large, have made acquisitions to fill gaps in the competency factor or to acquire customers in a new geography.

In the case of global giants, M&As were considered essential as the corporations found that the scale could be achieved through M & As.

However, the acquisition by large foreign IT companies in India is expected to continue for the moment, she added.

Referring to challenges for IT firms, she said that the IT firms could face problems in 3-5 years if the present cost-inflation continues. Another challenge lies in their ability to reinvent themselves quickly and move up the value curve.

She said that the size of the Indian mergers and acquisitions market for 2005 was expected to be around $ 13 billion, compared to $4-$5 billion in the previous year.

She also said that major M & A deals would continue to happen in the auto sector and in power, pharma and metals and mining sectors.

Inward acquisitions might happen in telecom sector and in mid-tier and smaller services segment in the IT sector, in the next few months, she added.

Asked about the common mistakes committed by Indian companies in trans-national acquisitions, she said that it would be difficult to pick out the mistakes, but pointed out that the big mistake, some times, was underestimating the running of operations after the merger or acquisition.

Lack of management was also a big issue. "Family-owned businesses have to change if they want to grow internationally," she added.