Foreign test for Indian firms

New Delhi, April 29: Complying with legal requirements in developed countries and successfully integrating the two companies post-acquisition are some of the major challenges that are commonly faced by Indian companies when they invest abroad, says a study.

According to a Baker & McKenzie report that examined country-specific opportunities and challenges of doing M&A transactions, outbound investments from China and India have shown robust growth in recent

Some of the challenges faced by Indian firms while investing abroad include legal hassles, labour issues, cultural gap

years despite the global financial crisis and economic slowdown.

However, some of the challenges that confront Indian companies include complying with legal requirements in developed countries; successfully integrating the two companies post-acquisition; navigating unfamiliar market practices (such as labour unions) and cultural differences.

The report added that determining the bidding prices particularly if a target’s value is dependent on intangible assets.

According to the report, the natural reso-urces, IT/ telecom and financial services sectors present the biggest investment opportunities for Indian firms and to avoid regulatory issues, it is important for them to gain an understanding of the compliance requirements related to the acquired company and execute a plan to address those compliance requirements quickly.

The report noted that Indian firms should keep existing management in place for two years or longer after the acquisition to help smooth out the transaction. The report was based on a survey of more than 350 executives conducted by the Economist Intelligence Unit (EIU) on behalf of Baker & McKenzie. — PTI