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Sometimes, the nature of the industry          conflict, even hostile attitudes. Acquirer
               defines the approach. The string of pearls     companies also need to ensure regulatory
               approach is very common in the IT/tech         and legal compliance.
               sector where large companies go on an
               acquisition spree to gain niche                Factoring all possible risks into the post-
               capabilities very quickly. In fact, a lot of   acquisition strategy entity is critical. In
               startups go into business with the             fact, today 90% of acquisitions fail in
               understanding that they will eventually        meeting the set time frames, and when
               be acquired. That clarity has been built       this happens, it destroys shareholder
               into the organisation in its formative         value. This shows the importance of
               stage.                                         getting your M&A strategy right.

               The M&A ballgame                               The pharma landscape

               To understand today’s M&A landscape,           Cipla’s M&A strategy encompasses both
               we must look at the business                   big ticket and string-of-pearls approaches
               environment. In the last 4-5 years, India      – we have done two big ticket
               has seen a spurt in M&As and a change in       acquisitions in the US recently and one
               the culture that can be directly linked to     small one valued at a couple of million
               the blossoming of the entrepreneurial or       dollars. We have developed a 5-year
               startup space.                                 decision matrix on what we will do and in
                                                              which geographies. Our M&As are a
               The startup culture prevalent today            reflection of our growth and risk appetite
               means target companies often have a            in specific geographies. Going forward,
               very different business profile. Typically,    we may take a bolder stance in certain
               they are in the pre-profit stage, with less    geographies where we want to achieve
               than 5 years’ operational history. Earlier     more meaningful scale in the
               companies were built from a growth             marketplace.
               perspective and had a distinct track
               record. Today companies are being built        Divestment is also an important part of
               from an exit perspective – the promoters       all M&A strategy – it could involve
               and founders of these young companies          removing assets that are non-core or
               look at short term value creation. These       inviting external investors to spin out a
               targets present a very different set of        SBU as a separate entity with a different
               challenges and risks (irrespective of          business model. So to sum up, string of
               whether the acquirer is following a string     pearls approach, big ticket acquisitions,
               of pearls or a big ticket approach).           divestments, all of these are elements of
                                                              Cipla’s M&A strategy, which itself is a
               Organizational culture is a huge factor in     part of our vision and gameplan for the
               any M&A. Target companies often have a         future.
               different style of operating, and post-
               acquisition engagement can be a rough          The pharma industry, much like the tech
               patch. Acquirer companies have to              industry, has built immense shareholder
               carefully consider how to assimilate such      value for 20 glorious years. Today, both
               companies into the parent corporate            these industries are at a challenging
               culture; conventional practices for            inflection point, and acquiring new
               integration may not work. Leadership           capabilities is going to be critical. Hence,
               mindsets play a big role. One has to take      M&A is and will continue to be a strategic
                                                              driver of inorganic growth.
               the promoter/ founder’s mindspace on
               both sides into account. There can be
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