India has never been big on corporate hostile takeovers. One can’t say it is not technically possible, but usually there was a gentlemen understanding among corporate players, that you don’t acquire a company without the consent of the target company’s board of directors, which is usually how it’s done in hostile takeovers. The regulators also made sure these takeovers are subject to scrutiny and current shareholders are given an opportunity to participate in an open offer, just in case they do not like the new owners, this becomes mandatory once the acquirer crosses 25% of shareholding.
Protecting companies from hostile takeovers had some wisdom inbuilt in it when they were conceived. The thought process was simple, a company is formed with founders taking the initial risk, pour their sweat and tears into an idea they believe and build a company, so after it gains success it cannot be given on a platter to a corporate raider with deep pockets, all set to reap the benefits of the initial risk and hard work put in by the founders.
It’s another matter, when the owner is willingly ready to sell his or her company, but hostile takeovers is usually about taking a business forcibly, unfortunately sometimes situations are created to put the founders on the defense and the only way out of the quagmire for the founder is to reluctantly sell the company. Let’s not go into names, but in recent years, hostile takeovers of a different kind have emerged in India, with company founders helpless and unable to save their company.
The bankruptcy code India framed was supposed to give a chance for bankrupt companies to reset their finances and at times sell these companies to financially stronger players. The start was fabulous in the first two cases, but it eventually got gamed by corporate raiders to purchase these target troubled companies for next to nothing. In the process, hostile takeovers took a different meaning and shape, where corporate raiders previously had to pay more than the actual price, the bankruptcy code gave them an opportunity to buy set companies with probably temporary financial mismatch at bargain prices, you just had to have the right connections.
All above, technical jargon is mostly applicable to listed companies, but what about the hostile or friendly takeovers of privately held businesses. The method could differ but the intention remains the same, buy the company by hook or by crook. In USA, it is common practice, companies are sold for various reasons. When Colonel Sanders sold KFC for 2 Million Dollars, one of the factor could have been his advancing age, but more so because he found the explosive growth too overwhelming to handle at his age.
The investors who bought KFC lacked the passion and sincerity of Sanders, they were in for a quick buck and they manage to sell it off in just a few years at 285 Million Dollars. Sanders was frustrated with the cost cutting measures the new owners had undertaken thereby effecting quality of his product and this is what he said to a journalist about the baby he created, but unfortunately lost control over it ‘My God, that gravy is horrible. They buy tap water for 15 to 20 cents a thousand gallons and then they mix it with flour and starch and end up with pure wallpaper paste. There's no nutrition in it and they ought not to be allowed to sell it. ... [The] crispy [fried chicken] recipe is nothing in the world but a damn fried dough ball stuck on some chicken.
Goa has a lot of family businesses that might be on the verge of changing hands or passing on to the Generation Next, but sometimes due to complicated family dynamics, things can get into a limbo and when ego comes into play, it is usually the outsider who takes advantage of the situation. Goans are advised, please resolve your difference at the earliest, because once sold to new owners, there will be no control on the operations and with changing approach to business, your brand can go downhill in no time and your legacy out of the window. Please prepare your succession plan well in advance, because people are on the prowl and will use horrible tactics to get control over Goan businesses. Remember everything Goan is trending in India.
The reason Goan businesses need protection from raiders is that Goa will not remain the same if business owners are going to be non-Goans whose culture is diametrically opposite to ours. They will mess the business model on day one and instead of adding value to your creation they will dismantle your hard work and your legacy, similar to the deterioration of the helpless Sander’s KFC.
Also once they get control over Goan businesses, they will yield so much power that Goans will be treated as second class citizens in their own place. In a recent video that went viral, a Gujarati is seen calling a Marathi Manus in their own place Bombay ‘dirty people’ just because they consumed non-vegetarian food in a vegetarian housing society and the local politicians did not even create a ruckus which was the general expectation of the Marathi Manus.
If the situation remains the same, then Goans better be prepared to be called worse names then ‘dirty people’ because of our food choices and there will be no politician that will come to rescue you. For example, there are already two Udupi restaurants in Margao city center compared to one Goan restaurant in a 100 meter surrounding area, one opened recently which carries a huge in your face Udupi sign board. Shame on the people of Margao for electing the same fellow for donkey’s years, who has now converted Margao into Udupi.
Goans are also advised to please stop your one-upmanship over each other because while we fight over Konkani and Marathi, the Gjarati language is all set to take over the numero uno position. Goa is already witnessing the takeover of Goan business, call it friendly or hostile, at the moment they are now confined to the hospitality sector and the mom and pop stores which have already gone out of Goan hands. Meantime politicians have absolute no pressure to do anything about the changing dynamics because Goans have never put any pressure on politician’s to preserve the Goan way of life.
(The author is a
business consultant)