Mysterious Broken Cross-Country M&A Deal: Bharti Airtel-MTN
Reddy, K. Srinivasa, Nangia, V. K., Agrawal, Rajat, Journal of the International Academy for Case Studies
This management case is designed to explicit the implied connection between business environment, competitive & industry forces, business strategy and negotiations. In a nutshell, it imparts the domain knowledge of inorganic strategies, like joint ventures, mergers and acquisitions (M&A), in order to keep their global presence and brand loyalty in the emerging markets. Lastly, Bharti Airtel--MTN cross-country M&A case helps students to get involve in international investment decisions in the perspective of international business environment. They also come to know various sensitive issues while finalizing the deal between two unknown parties, further how deal got complicated consequently caused the deal failure in the two negotiations during two successive years.
* Domain knowledge: Business Policy and Strategy
* Elective of the case: Inorganic Opportunities
* Focus part: Cross-border Mergers & Acquisitions
* For whom: BBA; MBA (Full-time and Executive); MDP's
* Estimated time for discussion: 120 minutes
* Method of lecture: Brainstorming; Group/Team participation
To meet the international business commitments and prepare students to craft combat strategies for achieving translational entity's objectives, the present case aims to illustrate the effect of global business environmental factors while negotiating cross-country M&A deals. It has been assisted by India--South Africa, a cross-border telecom deal. Further, it discusses key issues which have led to delay' consequently broken the inorganic negotiations that lead to strategic competitive and geographical advantage. In particular, this case builds a platform for management scholars to improve communication tactics whilst engaging in international business relationships. Conversely, it would be addressing sensitive issues in chronological order that how long-term negotiations would lead to collapse the cross-border relations. Exclusively, broken M&A deals help to find key failure negotiations which could be assist for choosing inorganic opportunities in future.
We now know that the "World is flat" and "Knowledge is borderless". As such, economic changes are bound to be rapid. Complexity and disparity are possible major factors worrying world leaders and global institutions. Indian economy, today a competitive, deregulated and open economic system, is one of the major destinations for foreign investors in the world. India encourages foreign affiliates to establish operations in the country through direct investment, joint ventures, M&A and outsourcing contracts.
The objective of present case is to describe and track critical factors behind the failure of mega cross-border deal between Bharti Airtel (India) and MTN Group (South Africa) in the global telecom industry. The case covers failure of advisors role-play and how negotiations were extended and leads to calling-off deal in the second innings--2009 after it was first attempt in 2008. It also covers the role of government and regulatory bodies of the respective countries. The alliance would have improved Bharti's competitive position as a leading telecom company in the emerging markets. Bharti and MTN needed an excessive inward focus for a feasible merger, when competitors were trying to snatch their business.
The history of mega mergers and acquisitions attest that most combinations end up by destroying shareholders value. Mergers fail largely because of expected synergies seize longer time to deliver, price is too high, or there is no complete in-charge. Bharti and MTN could have US$20 billion in revenues and over 200 million customers, making them the third biggest telecom company in the world after China Mobile and Vodafone. They would have spanned two continentals & able to cut costs by integrating technology and reducing overheads. …