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June 2009

Deal-making hubris

By Raman Jokhakar, Tarunkumar Singhal, Chartered Accountants
Reading Time 1 mins
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  1. Deal-making hubris

Ratan Tata’s admission of poor timing in Corus and Jaguar
Land Rover deals must be applauded for courage and openness.

It is rare for a businessman to readily admit in public
that he has made a mistake with a major business decision. In recent times,
perhaps, only Warren Buffet has admitted to being “dead wrong” in the
investment decisions that he made in 2008. From that point of view, Ratan
Tata’s admission to a British newspaper of poor timing in the Corus and Jaguar
Land Rover (JLR) deals in 2007 and 2008, respectively, must be applauded for
courage and openness. But Mr. Tata was not the only Indian businessman to be
afflicted by the irrational M&A exuberance of those years.

The Tata group is now grappling with the consequences of
both acquisitions. The Anglo-Dutch steelmaker Corus, for which Tata Steel paid
$6.7 billion following a bruising auction against Brazilian rival CRN, is
currently reeling under losses. A rescue package for one of its UK plants fell
through after four international companies terminated their contract with the
organisation, raising fears of 2,000 job losses.

(Source : Business Standard, dated 12.05.2009)

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