Action in the Strange Bedfellows Dept

The AOL-Time Warner merger made a $350 billion company and shocked the world in 2000. Amidst dot-com madness, little AOL.com used its $163 bn market-cap to buy out poor old-economy media giant--complete with CNN, Time, Warner Bros, HBO, et al, and worth a mere $83bn in the market.

AOL-TW set another record this year, with a $99 billion loss, the greatest in corporate history. Okay, not operating losses. The concluding $45 bn charge in Q4 was mostly due to depreciation in AOL's value. But that spelt a reversal of fortunes, the end of the AOL supremacy. With ex- or pro-AOL execs Steve Case, Gerald Levin, and Robert Pitmann out of the way, AOL-TW is finally run by TW execs, just as most of the old-economy old guards (including Ted Turner, who has just stepped down as vice chairman) wanted. 

India has seen few "big" M&As, especially in the tech business. Most have been quick and matter-of-fact, such as Airtel's acquisitions in Bangalore, Chennai, Kolkata, et al. The players usually keep things quiet, in the run-up. 

But February saw some M&A action. First, Aptech's fairly quick sale to SSI. Quite a logical move for Atul Nishar, getting away from having to worry about a training business under high pressure, to focus on Hexaware, the more profitable and growing software services company. For the merged entity, too, it makes sense to move to an operation with the scale necessary to compete with NIIT. It was just the unexpectedness of #3 SSI, struggling with dropping margins, suddenly buying #2 Aptech's founder's 28% for a mere $5 million. 

The next surprise was the acquisition of a DQ Top 20 company. GTL announced its acquisition of the Singapore-based Redington group, including Redington India. Whatever would this telecom equipment and services company want with a thoroughbred IT distributor? It pushes it up almost into the DQ Top 5, but sheer size could not have been the motivator. Nor the wafer margins of trading houses (thus the Rs 500 crore valuation of a Rs 3,000 crore group). Yes, GTL gets the a potential help desk and BPO business that Redington is 'sitting on', thought its distribution partnerships with vendors, and GTL's 1,600-odd tech staff could dig into that. Redington's customer base, through the channels, can be a further source of services business. All this is a bit of stretch, though.

So we have two contrasting M&As. One, the sell-off of a training company to a competitor, so that the remaining services entity can focus better. The other, a services business, buying a trading house, for customers and more business. Expect to see more action on the M&A front, in 2003.