L&T’s ‘hostile takeover’ of Mindtree is not quite surprising: Gartner

In a last-ditch effort, Subroto Bagchi, the co-founder of IT major Mindtree attempted to take back controls of the company after announcing his resignation from the post of the head of Odisha Skill Development Authority.

In wake of recent developments, Bagchi, one of the early stalwarts of Indian entrepreneurship, tweeted: “It is a tough day for sure, but not a dark day in the history of Indian entrepreneurship.”

It is a tough day for sure, but not a dark day in the history of Indian entrepreneurship. As first generation, hard working entrepreneurs, we will carry the burden of dreams. I will tweet to you again one last time to sign out of this handle, to tell you where to find me.

— Subroto Bagchi (@skilledinodisha) March 19, 2019

This follows Larsen & Toubro’s acquisition of Café Coffee Day founder VG Siddhartha’s 20.3 percent stake in Mindtree. While the IT space and media is abuzz with the possibility of a hostile takeover, analysts believe increasing competition in the rapidly-evolving tech space paves the way for market consolidation, M&As and takeovers – hostile or otherwise.

What makes this a ‘hostile takeover’?

L&T has, for some time now, been attempting to take over the Bangalore-bred IT company, Mindtree. However, this was met with stiff resistance from the founders of the company. 

L&T’s CEO and MD, SN Subrahmanyan revealed that the company was approached by VG Siddhartha, the founder of the vastly-popular Café Coffee Day chain, regarding his 20.3 percent stake in Mindtree. 

  Inorganic growth has become a new norm for many of the large and midsized players. Mindtree has been gaining traction with its capabilities around IoT. It brings edge analytics, digital technologies, DevOps and distributed agile capabilities to the table. DD Mishra Sr. Director Analyst, Gartner

The reason the acquisition is being viewed as a hostile takeover is because Mindtree’s founders and shareholders vociferously opposed L&T’s bid. Presently, Mindtree’s founders collectively hold 13 percent of the company’s shares. However, if the deal comes through, L&T will automatically become the majority stakeholder in Mindtree with over 50 percent stake.

In a statement to ET, Subrahmanyan said that Mindtree would be run as an independent company with L&T’s investment – the firm will provide customer connect and support. 

Why L&T’s takeover bid is not a bolt from the blue?

DD Mishra, Senior Director Analyst at Gartner believes that the acquisition should be viewed as market consolidation and M&As and takeovers are a part of the game.

“Market consolidation is a reality when there is tough competition to expand and differentiate. The pace of change due to digital disruption is further fueling partnerships, M&As and takeovers which are not very uncommon. This market consolidation is going to continue as technologies evolve for the next couple of years,” he explains.

Additionally, he says that inorganic growth has become a new norm for many of the large and mid-sized players. “Mindtree has been gaining traction with its capabilities around IoT. It brings edge analytics, digital technologies, DevOps and distributed agile capabilities to the table.” he adds.

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