‘The farce of valuation will be exposed’
It seems that happenings at Fortis Healthcare are in competition with saas-bahu serials on TV for TRP. Not a day passes by when it isn't pulling in an eyeball, such attraction may be good for serials but not for corporate as it dents image. However, despite its negative impact, there is a big positive effect also. It is forcing transparency, accountability and may be good governance while exposing weaknesses of the present system.
It has exposed threadbare what goes on behind the scene in restructuring and M&A transactions, in so far as valuation is concerned. The board, after a detailed exercise and deliberations based on independent valuation, fairness opinion and audit committee recommendation, decides to enter in a transaction and in no time the prospective buyer increases valuation by 21 per cent, without any effort by the board. What went wrong? Did the buyer decide to act as a Good Samaritan and dole out extra or did the board fail in its duty, either due to inefficiency or other reason? It clearly establishes that entire valuation exercise and the process is a farce. It's like a music band which produces the tune to the liking of the buyer and the seller.
The board once again surprised investors and analyst by recommending the offer by the Munjal and Burman families, although at least on the face of it other offers appeared to be better. It appears that the board was divided and didn’t follow the advice of various advisors appointed at the cost of shareholders. Not allowing seven days for due diligence on the pretext of urgency, while spending good 45 days from one offer to another lacks credence. Why doesn’t the board want to say why it didn’t follow the advisors? Or is it a case that advisors were really independent for a change?
Once again despite numerous laws to protect, investors are short-changed. They can either pick up fights or have to surrender meekly to wishes of those in control -- in this case without any economic risks as the promoters hold almost no shares. One will have to wait till the law becomes effective in practice rather than on paper. Hope one day the farce of valuation will be exposed. Till then we all can sing “Woh subah kabhi to aayegi..."