Author: madan

December 13th 2006. Well, i guess its going to be one of those days I will never forget! I picked up my first new car! Eleanor, she is a moon mist grey Fiat Palio. Sigh! She’s such a beauty, that i am worried I might cheat on my girlfriend with her! 🙂

I have always loved the Italian Marque, in my opinion it oozes sexiness and masculinity. My quintessential muscle care. Till such times I can pick up a hemi, I guess my Eleanor will be an Italian badge!
Buying a car, i have figured out is one of those really hard decisions. Especially if you are shelling out a lot of money to acquire this, you will always think twice at all possible stages. This means that you always wonder when you are going to be making a mistake. After you buy it, every small thing makes you wonder, “oh no, is this going to break down now” or “is this normal” or “oh my god, what is this” or “oh shit, please start” nonetheless, buying a car is stress full.

After I took delivery, I was driving so bloody carefully, i never did think that would be the scenario, 🙂 well, its a matter of time, once I get used to her, its going to be me and my love, riding down the highway!

I have just ucnovered the greatest conspiricy of all times.
Companies are getting people to work more.

now why and how did i come to that conclusion ? well, very simple! the food!
imagine if companies are serving food known to cause impotency in men. So if a man is impotent, then he cannot perform, so if he cannot perform, he will be cursed by the partner (and that leads to a fight) and if he gets cursed by the partner, he would much rather not be at home ,and if he is not at home, (he obviously cannot go to the bar, as the same problem will exist with other women as well) he will be at office. working!
Now! more efficiency, and longer working hours for the same pay!
well, that tackles 70% of emloyees. For the other 30% being women, the same food causes “performance problems” in men, and that will lead them to not enjoying their times at home, so they end up working more.
so net net! the company is able to extract more work by serving food!

Sigh!

I guess there seem to be a lot of “random” messages going into my blog. very many a time, the question arose, what is random. is it a series of events that have no preset order? or going deeper, are they the ones that have an order, but its just that we cannot see what the order is. It is at that level, when we see order in chaos, that we realise that we are above most materialistic goods. So many times in the past few weeks I have been wanting to sit down and just write some stuff, but never got around to doing it. work keeps me busy at ffice, and when i get back, well, i have to catch up on work at home. so, sigh! we live such busy lives that we forget what it is to live. I guess we need to blame ourselves for the scenario as we have no control over the way our life goes. well, guess what… thats random! 🙂 so, we are living a random life!

for that one thing

The latest figures from transaction management firm Dealogic show that the value of deals this year has already set a new record, at $3.37trillion (£1.77trillion), surpassing the previous high set during the dotcom buyout bonanza of 2000.

This year has not just been notable for the volume of M&A, it has also been remarkable for the size of the deals taking place.

The year got off to a big start with the $39.5bn takeover of French steel firm Arcelor by rival Mittal Steel in January.

In February the deals got even bigger, with Spanish utility Endesa receiving a bid from German energy group E.ON that has subsequently risen to $66bn.

And then in March, US telecoms giant AT&T agreed to acquire smaller rival BellSouth in a deal worth $83.4bn.

M&A fever

The relentless run of deals has continued throughout 2006, culminating earlier this week with $75bn worth of deals in one 24-hour period.

According to the experts, there are a number of key factors driving the surge in M&A activity seen in the last couple of years – a boom in demand for commodities and raw materials, modest company valuations and the availability of cheap money.

The economies of developing nations like China and India are growing fast, creating huge demand for the commodities needed to build new factories, roads, power stations and ports and produce manufactured goods for their booming export trade and domestic markets.

This has sent commodity and energy prices rising and boosted profits for oil and gas companies, miners and steel makers.

graph of M&A deals in 2006

It has also led to consolidation in these sectors as companies look to increase their production capacities and cost efficiency via the quickest route – by buying up rivals.

Deals that have fallen into this category this year include Mittal Steel’s $39.5bn purchase of French rival Arcelor, copper mine owner Freeport-McMoran’s $26bn swoop for rival Phelps Dodge and Suez’s $43.1bn tie-up with French counterpart Gaz de France.

Meanwhile, strong economic growth around the world in recent years has boosted corporate earnings across most industry sectors have left company valuations at a reasonably-priced level.

“Balance sheets are as healthy as we have seen in a long time,” says Lars Kreckel, an equity strategist with investment bank ABN Amro.

“This gives them the capacity to fund a takeover, and now they have the confidence as well.”

Private equity

According to John Cole, a partner at consultants Ernst & Young, heavy M&A activity is one of the hallmarks of a stable, mature economy.

TOP FIVE DEALS 2006

1. AT&T (US, telecoms) buys BellSouth (US, telecoms) – $83.4bn
2. E.ON (German, energy) buys Endesa (Spanish, energy) – $66.1bn
3. Suez (France, utility) buys Gaz de France (French, energy) – $43.1bn
4. Mittal Steel (Dutch, steel) buys Arcelor (French, steel) – $39.5bn
5. Banca Intesa (Italy, finance) buys Sanpaolo IMI (Italy, finance) – $37.7bn

Source: Dealogic

“There comes a point when even a well-run company cannot grow much further organically, it can’t eat any more market share,” he says.

But the main impetus for M&A growth this year has not been companies buying other companies, it has been private equity investors buying companies.

According to Dealogic, private equity firms have done $563.2bn worth of deals this year, 17% of all M&A activity, up from a 12% share of activity in 2005.

With their recent successful track record of buying under-valued companies and selling them at a profit, private equity giants like Kohlberg Kravis Roberts, Permira, Blackstone and Carlyle have been able to raise huge funds from eager investors wanting to share in the profits.

Investment bank Credit Suisse reckons that private equity houses will raise up to $200bn in the US and Europe.

But the money they get from investors is dwarfed by the huge sums they will be able to borrow against it.

Credit Suisse estimates this will swell their takeover budget to between $500bn and $600bn.

Cheap debt

Cheap money is at the heart of the M&A bonanza.

Building site in China
Surging economies in China and India are lifting global earnings

Although interest rates are on the way up in many countries, they are still historically low.

Hence private equity companies can borrow huge amounts of money, confident that they can accommodate these debts with the earnings growth they can achieve from their takeover targets.

“Private equity companies are very good at making use of low borrowing costs,” says Mr Kreckel.

“All the pieces are still in place for strong M&A activity looking forward.”

Prospects for 2007

If anything, Mr Kreckel expects the deals to get bigger as the even greater sums available to invest bring larger companies into play as potential targets.

“It can make sense to buy one big company instead of 25 smaller ones, and they often offer more value,” he says.

Copper mined and processed by Phelps Dodge
Rising commodity prices have boosted mining company profits

Although the current M&A cycle is three years old, it shows no sign of stopping.

Recent notes issued by ABN Amro, Credit Suisse and Morgan Stanley all point to another bumper year next year.

Economic growth looks set to remain relatively strong and stable, and interest rates should stay at historically low levels.

And although M&A activity has surged to levels seen just before the dotcom crash and economic slump in 2001, more companies are funding their takeovers with cash rather than financing the deal with their own shares.

Experts also point to the historically low levels of companies defaulting on their debts.

Things could change – interest rates could rise sharply, company earnings could slump and a number of high-profile private equity deals could turn sour and spook the markets – but at the moment, M&A activity is set to continue apace during 2007.

taken from bbc world website: http://news.bbc.co.uk/2/hi/business/6168868.stm

i saw a rainbow today.

the funny part was it was a clear hot day, i thought maybe my eyes are playing a trick on me, but then two others also confirmed what i saw. maybe its not a rainbow, but a part of a rainbow. light reflecting very strangely off a cloud can cause light to disperse and cause a rainbow. its lovely, in stark contrast to the metal chinmey of the generator that pokes into the skyline like an ugly thorn, this adds a suble beauty. the green tree at the base of the tower, ad the vibrant raimbow at the top, its ads the color one looks for in an increasingly bleak life. its still there ,a few mins later, strugling as the clouds sweep past. its only source of the elexir of life is the white water mass, high above the ground. strugling.
life is many a times like the rainbow. today it was formed here, tomorrow, it goes where there is rain. we need to go where we find an opportunity to make us better.
make us fly faster,
make us realise the reason we are here.
its amazing! sometimes things are so clear, but they do not exist. physically you can see it, but physically you cannot prove it is there. there exists no form, no feeling, nothing.

I drove down to bangalore the other day, and took the famed GQ… man, was i impressed. I was able to do a steady 90, even while passing thru villages. However, true desi style, you had maniacs driving on the wrong side, and glaring at you like your at fault!

classification of growth has lead to a very generic macro level perspective that can be compartmentalized as organic and inorganic. One where the company grows through its hard work and push, thereby improving systems within, and products leads to better profits and share value thereby a bigger market cap. This, I feel is a good way of growing, simply due to the fact that the possibility of learning during the process. This is much slower and has its own loopholes and downfalls, there by making this route to growth sometimes a harder path to take.

Another interesting path that is taken by many is the “inorganic” path. This mainly encompasses the M&A route that leads to a larger organization with a better market cap. However, mixing oil and water cannot happen by just mixing them, you need to add emulsified agents, or blend them in, like with mayonnaise. The acquiring company generally looks for a company that either compliments or supplements its existing talent pool thereby enabling itself to move into a relatively new market, or a new product or a another competitor. In essence, any M&A activity involves changing the 4Ps and creating a new set of 4Ps that are different from the company’s existing ones.

So how does an M&A activity help a company? Well, like the points mentioned above:
1. The company sees great scope in a particular market, however, it does not posses the necessary talent or technology to enter this market, hence it decide to acquire a company that is doing well in this market for the same.
2. The company needs to grow to show that it is doing well, I call it the ford route, acquire other companies that will help add to your product portfolio and say very boldly to the world that my product portfolio has increased hence I am dong well.

there are many more reasons why M&A activities take place, but this is not the reason of this post. Many a time, actually majority of times the merger fails to take off, due to cultural or other factors, some notably good ones that lost value for the share holder rather than gained value are he AOL-time Warner merger, Daimler Chrysler,etc. etc

However, a symbiotic relationship need not necessarily exist purely through a merger or an acquisition. There are MoUs that can be signed by companies such that they can work with each other to help provide better services to their customers.

Cashnet, a common atm switch built for Indian banks is one such example where consolidation of infrastructure has worked well to better the customer experience. Cashnet is in direct competition to VISA/Maestro’s switching and backbone networks, however, with the interconnect fees being charged per transaction, the possibility of moving customers from counter banking to ATM banking would have been tough with this as a deterrent. The average cost of servicing a customer at the branch works out to about Rs.200/- per transaction as opposed to Rs.20/- at the ATM and about 0.40P via the internet. Hence, embracing technology is a good way forward for the bank thereby allowing them to be able to spread their reach and improve the customer touch points.

Consolidation in t he banking industry has seen a string of mergers between banks and other institutes. The ICICI merger along with ICICI bank to result in a single entity, the same with HDFC and TimesBank resulting in HDFC bank, Global trust bank etc. This can be seen as a path forward to many banks.

Like with setting up any infrastructure, the costs involved are rather high, and the returns need not necessarily offset the investment. The greatest risk is the fact that a large percentage of the income is from interests generated via lending. India has the highest percentage of vehicles bought on loans. The worldwide average is about 70% vis a vis 80% in India.

The ability of the treasury in the bank to be able to roll the customers savings profitably is the key to survival of the banks. Hence, areas where the bank can save on infrastructure costs it will either outsource or work with other banks. In the case that the bank has decided to go on its own, eventually might lead to its collapse, and its assets being picked up by another bank.

The banking scene is fraught with trends of Mergers or acquisition or understandings within the community in order to survive against the big fish.

I stand at the door,
wondering where i need to go,
my life is ahead of me,
like a book, with empty pages.
waiting for me to write,
about, me, my love and my life.

now how i choose to write that,
it is all up to me,
cause my life is in my hands,
to be what i want to be.

I stand at the door,
wondering where she is,
looking for the light,
feeling a sense of pride,
now, why should it affect me?
the five words, L,O, V E

Now How i choose to write that,
it is all up to me,
cause my life is in my hands,
to be all i want to be.

—- Guitar Solo—–

the door closes,
i am neither in nor out,
wondering why i have to be,
in so much of doubt,
i see the light,
i see the dark,
i see the love,
as bright as a spark,
i wonder what holds me,
no matter how hard i try,

its all up to me now,
to live my life,

now how i choose to write tht,
it is all up to me,
cause my life is in my hands,
to be all i want to be.

Well, I could not think of a better title, because i just wanted to pen down some of my thoughts, and my torch, which incedently is new, was lying next to me, hence the title.

One of the things i personally belive de-motivates anyone beyond measure is the lack of any acknowledgement from people involved. i put in a lot of effort into something that i did sometime ago, but hoewver, acknowledgement has never been attributed to me, but to some others, sometimes, i wonder why this happens. is it that its an oversight? but i guess what upsets more is that someone who does nthing gets acknowledged as having contributed, thats even more depressing.
sigh!!1 i guess i have to just live with this kind of stuff all the time!!!