There are prayers and some of them are answered and a lot more are lost into wilderness, but we continue praying. In the previous post of the same topic I had prayed

asato ma sadgamaya
tamaso ma jyotirgamaya
mrtyorma amrtam gamaya

Lead me from the unreal to the real.
Lead me from darkness to light.
Lead me from death to immortality.

I believe Asathoma Sadhgamaya has been answered with the acquisition of Satyam by Tech Mahindra.

It was heartwarming to see that M&M group known to follow high level of Corporate Governance, Set high standards for themselves actually compete and win the Satyam Bid. Satyam is in the process of moving from the untruth to truth.

Of course there are critics of Tech Mahindra who had questioned the price paid, uncertainty about the law suits, loyalty of customers and employees and further questioned whether Tech Mahindra had the expertise to pull tainted Satyam out of trouble and take it to greater heights. I would like to examine some of the criticism of the deal.

High Price

With regard to the higher price, Tech Mahindra obviously saw a much better value with Satyam than the rest of the bidders. L&T was 20% lower because of the lower synergies that exist between Satyam and itself. W Ross was never a serious bidder in the sense that they buy distressed Companies at very low valuations. They could have got it a slightly lower price say Rs 50 per share, but seasoned professionals know that the way it goes in business.

Expertise and experience

Tech Mahindra is relatively smaller to Satyam and hence the question of Expertise and experience to run Satyam Successfully. The fact remains that Satyam would provide the right incentive for Tech Mahindra to get into the real big league and the employees could regain the confidence due to the Corporate Governance history of Tech Mahindra. Customer retention would be a difficult task but can be achieved with the right efforts. This is a case of management taking on new challenges making it rather than a “seen all, done all” as would be the cast with over experienced attitude. Tech Mahindra would bring in the right energy to the table to take Satyam to regain lost glory.

Class Action Suits and Upaid suit

I believe that Upaid will be settled out of Court and the legal team has estimated liabilities arising from the class action suits

Lack of Financials

Lets not forget that financials are for the business and not the other way around. Yes there may be some surprises thrown in the financials, but that is something that would be factored in to the valuation. I need to make a mention about the auditor’s role here. Not PWC, but the other firms that are working on restating the financials. What is taking them so long? I do understand the risks involved restatement of financials of this order given the history of Satyam, but this deal completion does not show the auditing profession in good stead. Auditors have to realize that they have to support the business and the business needs. Thousands of customers, investors, employees and creditors are in the lurch for over 3 months and the financials are still getting ready. Obviously by the time the financials are ready the Company would have lost its Customers and employees and been pounded by Creditors and investors. Auditing profession needs a relook.

We should understand that there is still a good underlying business model which needs to be Channelised well to take to success.

We have to greatly appreciate the role Government played. Maybe this should be an election issue. Of course they have not made an election issue out of this as not many of us go to Vote. In less that 3 months prompt action have been taken not only to get the guilty to book, but also ensured that the Company’s customers and employees are protected without any bailout funding. Furthermore They appointed eminent personalities as Board of Directors who have successfully taken the serious issue to its logical conclusion. This should enhance India’s image in the corporate world that a storm of this scale could be subsided in such a smooth fashion.

We should have the second and third line of the Prayer is currently captive with management of Tech Mahindra and the new auditors and I am very positive that it will be answered soon.