Acquisition of global companies to grow big


The Indian multinational Videocon is walking tall after having bought French consumer electronics Thomson’s color picture tube facilities in Italy, Spain, Poland, and China, as well as Swedish firm Electrolux’s India business. Now Videocon Industries has bid for South Korea’s Daewoo Electronics.

The top management of Videocon has been the most aggressive in terms of consolidating their business empire in the consumer durable industry as compared to their peers—Mirc Electronics or the BPL.

Apart from Daewoo, Videocon have also set their sights on Polaroid’s liquid crystal display (LCDs) television business in the US. Videocon is not the only one eyeing the Korean electronic company there are about 18 other appliance makers and financial groups that have submitted bids.

Interestingly, names of LG and Samsung seem to be missing from the participatory list for the takeover of country cousin— Daewoo.

Videocon confirmed its interest in both Daewoo and Polaroid and it is believed that their aggressive bidding should work in their favor. Videocon has a cash flow of about $22.5 million and will be able to adequately fund the Daewoo deal.

So why is Videocon on an acquisition spree? The chairman of Videocon group, is clear that his strategy is to go global. They could become an original –equipment manufacturer to the world’s best brands in the consumer durable space as well as to retail chains. Secondly, the group gets access to international markets, where they could build the flagship brand.

An analyst said that Videocon, is an integrated consumer electronics and appliances company through these acquisitions and can have better pricing for its products. In India , Videocon brand stable includes Akai, Sansui, Toshiba, Hyundai, Electrolux and Kelvinator. An expert said. “The Dhoots (Directors) of Videocon are deploying a good strategy but the key issue is managing and integrating the business,�

Creditors own 97% stake of unlisted Daewoo and according to reports in the foreign media, the sale price could be in the region of $1Billion. The Korean group went bankrupt in the late 90s and has been restructuring itself. Daewoo Electronics has been streamlining its businesses, focusing on manufacturing air conditioners, washing machines and refrigerators.

Daewoo operates six plants on South Korea and 18 overseas units. Its assets totaled 1.65 trillion won at the end of 2005.

According to Videocon, Polaroid, a well-known brand in the US, has a presence in the smallest town in the US and is available in all departmental stores.

The strategy, Videocon is adopting to have a Global presence seem to be methodical, planned with a foresight of synergy and integration. They already have a good representation in the European markets but have not been so successful in America. Acquisition of Polaroid, offers them a good chance to enter the US markets for Polaroid as well as their other products too.