India Strategic Market Entry W W W . A L C O R F U ND .C O M - - PowerPoint PPT Presentation

W W W . A L C O R F U ND .C O M

India Strategic Market Entry

• Background about ALCOR
• Eric Cohen

– Growth Strategy – Why India – Opportunities – Attractive markets – IP Protection – Funding growth

• George Molakal

– Strategies and Rationale for India market entry – Benefits of cross border JV/Alliances – India Focus – Government Controls - India – Indian Legal Framework – ALCOR and Processes, Deliverables, Milestones – Case studies – Next Steps

5/11/2011 ALCOR - Strategic India Market Entry 2

• Education: MBA Harvard Business School, B.S. Eng.
• Univ. of Wisconsin
• India & China Lead Trader, GE: Tech transfers, JV,

suppliers dev., acquisitions

• CEO, Ampere: established multiple JVs in Asia
• GM, MAT: largest Chinese PEG. Acquired companies

India & worldwide

• Managing Partner, WHI: PEG acquired 21 companies.

Asia Greenfields

• President, PPS: Indian Co. (Chicago) ops in India and

U.S.

5/11/2011 ALCOR - Strategic India Market Entry

ERIC COHEN

3

Indian 8% GDP growth & 8th largest economy in the world Demographics: one of youngest countries in the world, average age 25 Consumer driven (not government demand). Additional 40 mm wealthy consumers ($1m+ earners) within 10 years. IT infrastructure with the U.S. Indian Judiciary, British law based English language Low cost labor & large labor pool (domestic, L1 transfers) Trend China -> India: Physical infrastructure, IT infrastructure, FDI, costs

5/11/2011 ALCOR - Strategic India Market Entry 4

U.S. companies : low costs labor, high growth markets Indian companies: technology, brands, access to $16T U.S. market. Window of opportunity for value creation before equalization

5/11/2011 ALCOR - Strategic India Market Entry

Value Creation Acquisitions Joint Ventures Greenfield partnerships Sales Office More Value Creation/ Harder Less Value Creation/ Easier

5

• Telecom- 4G network build out to serve high data expectations
• Infrastructure- High transaction costs arise from inadequate and

inefficient infrastructure. Will be GDP bottleneck.

• Power- demand going up exponentially. Currently 2/3 coal based.
• Water- wastewater, agriculture, commercial purity
• Agriculture- food inflation faster than lower class wages, social

issues

• Food processing- middle class growth
• Precision machining- turbine, close tolerance
• Private education- problem with cost & quality. 90% Univ grads
• unprepared. Soln: WIPRO, private, online, U.S. universities

5/11/2011 ALCOR - Strategic India Market Entry 6

Advantage of India vs. others is rule

• f law. Ex. Office of The Controller

General of Patents, Designs and Trade Marks. But rule #1, don’t rely on the law for IP protection Trusted advisor or partner Local partner with skin in the game Deep diligence- private eye example Creative business structure (advisor can assist). Ex., supply controls/ electronics, ship to 3rd party company, multiple suppliers coming into final package.

5/11/2011 ALCOR - Strategic India Market Entry 7

Funding Type Cost

Indian Partner Little to no capital if you bring value Cash flow Low U.S. Senior debt Low (L+300) but usually not available Indian Senior debt Med (L+1000) Mezz debt Med- high Equity High

5/11/2011 ALCOR - Strategic India Market Entry 8

5/11/2011 ALCOR - Strategic India Market Entry 9

• Education: MBA, PLDA, PEVC : Cardiff University and Harvard

Business School.

• Fellow : Ashoka Innovators for the Public, and actively set up

the National Organization for Tobacco Eradication(NOTE) in SAARC Region (7 Countries).

• CEO : ICAN Healthcare Ltd – Built ICAN to a national
• rganization spanning 20 cities in India pioneering managed

care.

• International Director M&A: WORBUS Global Group of
• Companies. Completed 30 plus cross border transactions and

worked in England, Kuwait, Toronto, Shanghai and Mumbai setting up cross border M&A deals globally.

• Directorship : In several companies globally such as – KASA

Anlagen, Emdet Neff, MDI India etc.

• Principal and CEO . ALCOR Fund – US & India Operations,

executing more than 15 global M&A transactions, and Investments above $250 million USD.

5/11/2011 ALCOR - Strategic India Market Entry

GEORGE MOLAKAL

10

By deploying a global growth strategy through Joint Ventures and Acquisitions, the sales revenues, the share price and the global brand value of American Company would grow higher, permitting American Company to serve more customers, hire more people, and maximize wealth for its shareholder and stakeholders

5/11/2011 ALCOR - Strategic India Market Entry 11

5/11/2011 ALCOR - Strategic India Market Entry

• Grow the top-line

A

B

C American Company Acquired Emerging Market with High Growth & High Demand India China A B C A B C INDIAN Merge CHINESE Merge/ Acquire FOLLOW YOUR CUSTOMERS GLOBALLY

12

Global Automotive Players Global Automation Players Global Electronics Players

The number of middle class population with high spending capacity is more than the population of America. Coupled with the low cost manufacturing ability, the market is

• ut there in India.

All the global big names in industry are setting up presence in India If your customers are in India, it is only prudent that you follow them as well.

5/11/2011 ALCOR - Strategic India Market Entry 13

5/11/2011 ALCOR - Strategic India Market Entry

 Grow the bottom-line

Increase sales revenues By 70%-80% Selling in Emerging High growth Markets Low-cost Manufacturing base Competitive pricing to defend the core & grow- 30%-50% growth

14

5/11/2011 ALCOR - Strategic India Market Entry

• Grow the global revenues : top-line

15

5/11/2011

Fund : Invested Company Strategy I

Most American companies do not have: a) Low cost manufacturing base b) Sales presence in high growth markets c) High value chain integration capability.

• The “technology and processes” of

American companies should be leveraged with similar low-cost base companies in emerging, high growth economies. This powerful combination will result in building a globally sustainable company’ through the four fundamental pillars of growing a global company.

Technology & Processes High growth market Low Cost manufacturing base High Value chain integration capability

ALCOR - Strategic India Market Entry 16

JV Partners American Company Local Management

Manufacturing

Capacities More Industry Verticals More Product Verticals Commercial Excellence Low Cost

Manufacturing

Domestic Customer Base MNC Local Customer Base Global American Company Current Strengths of American Company Build American Company brand locally Cultural Mix Newer product verticals & Industry Verticals Revenue Enhancement Varied range of products Cross Border Marketing Team Building Company Globally 100% Asset Utilization

5/11/2011 ALCOR - Strategic India Market Entry 17

5/11/2011 ALCOR - Strategic India Market Entry 18

Current Market

May be

Lost Market

Pricing Index Business Lost to low cost manufacturers Sometimes gets awarded, sometimes lost Currently catering to markets that afford higher pricing High Price Medium Price Low Price

American companies target the small market ( red) because of its technical strengths and its capabilities of producing high quality critical

• parts. Easy parts

are low priced and are picked up by

• thers, but do add

a lot of value for sales revenues

5/11/2011 ALCOR - Strategic India Market Entry 19

Innovators Makers Component Manufacturers Integrators Mechanical Design Mechanical Assembly Systems Architect Design Level 4-Level 5 Integration Electromechanical Integration

Drives and Peripherals EMI Plastics Sheet Metal Fans Cables

Basic System Test End-User Configuration

Power Supplies

Final Systems Test

Software

Sub-Assembly Test

Backplanes

* Up to Sixteen Opportunities for Margin Stacking

* Margin stacking is a problem; it's not clear how all the links in the supply chain can make money, or how much savings could be offered if they were consolidated 5/11/2011 20 ALCOR - Strategic India Market Entry

Innovators US/ India;

Mechanical Design Mechanical Assembly Systems Architect Design Level 4-Level 5 Integration Electromechanical Integration

Drives and Peripherals EMI

Plastics Sheet Metal

Fans

Cables Basic System Test End-User Configuration Power Supplies Final Systems Test Software Sub-Assembly Test Backplanes

Component Manufacturers

* By consolidating the supply chain into a single source for all parts and services, a majority of the margin stacking is eliminated, resulting in significant cost savings

* Up to three Opportunities for Margin Stacking

5/11/2011 ALCOR - Strategic India Market Entry 21

A marketing team will visit these potential targets pitch for the Joint Venture

• MNC customers in India
• Various Product Verticals
• International Procurement

Offices IPO’s

• Captive Exports – American

Company as platform to NA

• Global markets through JV

I P O Customers MNC Indian Customers NA Platform vide- American Company Indian Prices Captive Exports – American Company Branding Domestic Manufacturers US Technology Customized Solution US- India JV

5/11/2011 ALCOR - Strategic India Market Entry 22

American Companies can choose whether to unlock this added value

• Worldwide sales /

Global Customer Base

• Multi Geographical

presence

• Ability to manufacture

low cost and high complex products.

• Benefit from the

higher multiples applicable in India

American Company would get an added multiple arbitrage increase – 3X +

Sales revenues shoots upwards Boost Profits - EBITDA Business Risks mitigated

5/11/2011 ALCOR - Strategic India Market Entry 23

5/11/2011 ALCOR - Strategic India Market Entry 24

Design Manufacturing of parts Assembly of components Packing and logistics Customer Service Core parts manufacture Integration and Tests Design Manufacturing of parts Assembly of components Packing and logistics Customer Service Core parts manufacture Integration and Tests 7% 7% 6% 5% 5% 8% 6%

US Company East Asian Company

5/11/2011 ALCOR - Strategic India Market Entry 25

Did you create a competitor ? YES !! – YOU DID

Risk Mitigation

• If sourcing : You must have equity partnership for the intangible value of

knowhow being transferred, unless it is very simple part (commodity)

• Joint Venture for captive sourcing mitigates these risks.
• Finding the right factory
• Negotiating prices & intangible equity with convertible
• ptions to JV or Strategic Alliance.
• Oversees the tooling
• Monitors the factory production
• Conducts quality inspections, financing, insurance,

customs clearance

• Executes delivery right to your warehouse.

ALCOR has a “right sourcing” team, that handles

5/11/2011 ALCOR - Strategic India Market Entry 26

5/11/2011 ALCOR - Strategic India Market Entry 27

5/11/2011 ALCOR - Strategic India Market Entry 28

Typical JV Contribution

Cash Investment Machinery / Old Equipment Intangibles

• Technology and Process
• Business Commitment in India
• Global and Captive Business

Commitment

5/11/2011 ALCOR - Strategic India Market Entry 29

5/11/2011 ALCOR - Strategic India Market Entry 30

Pre determined Price India Co US/EU Co Global Sales Team Sales $XX Million Threshold Buy In Customers U1 U2 U3 U4 Contract TBi

Direct Buy in with Tangible & Intangible India Co US/EU Co SWITCH 50 51% Equity Swap Model

1

India Co US/EU Co 26% 35% 49% 50% Year 1 Year 4 Year 3 Year 2 Mbi Model Minority Buy In Intangible + some cash Bc/ C Bc/ C Bc/ C

2 3

5/11/2011 ALCOR - Strategic India Market Entry 31

Important step in deal creation Partner identification

5/11/2011 ALCOR - Strategic India Market Entry 32

Details on ALCOR

5/11/2011 ALCOR - Strategic India Market Entry 33

Global Board M&A Corporate Finance Equity Capital SME Fund S2 S3 S4 S1 T1 T2 T3 T4 SME – PE SME - Debt Cross Border Joint Ventures Complex Debt Venture Capital Private Equity Acquisitions Project Finance ECB

5/11/2011 ALCOR - Strategic India Market Entry 34

5/11/2011 ALCOR - Strategic India Market Entry 35

India Head Office in Pune Metro offices through Associates

• Delhi (North )
• Mumbai (West & Financial Capital)
• Chennai (South)
• Kolkata (East)

Direct Employees : 30 Associate offices (Business

Development : Chartered Accountants private offices )

48 Locations across India : Spanning A, B and C Class cities.

5/11/2011 ALCOR - Strategic India Market Entry 36

Automotive Power Telecom Electronics Software Real Estate Education

5/11/2011 ALCOR - Strategic India Market Entry 37

George Molakal MBA, PLDA, PEVC – CEO

• Studied with honors at Cardiff University and Harvard Business School
• 30+ cross border Mergers & Acquisitions transactions from US to India,

MENSEA & China : 2004-2010

• Wide global experience working in multi continents – Europe, Middle-east,

India, China, Canada and United States, and was CEO of ICAN a managed care company

• Fellow of Ashoka Innovators for the Public – Arlington, Virginia

http://www.linkedin.com/in/molakal

Pradip Shah MBA - Board

• CA First Rank holder and Graduate of Harvard Business School.
• Founder Managing Director of The Credit Rating Information Services of

India Limited (CRISIL), India’s first and largest credit rating agency

• Prior to founding CRISIL, Mr. Shah assisted in founding Housing

Development Finance Corporation (HDFC), India’s first retail housing finance company, in 1977.

• Holds Directorship positions across several listed companies, charities

and government boards.

• Floated the first PE fund for India and has wide track experience in

funding PE projects.

5/11/2011 ALCOR - Strategic India Market Entry 38

Team Biographies

Thomas Mathew LLB MBA MSP –Board

• Graduate of Symbiosis Law School , GBS – UK
• Successful track record intricate legal corporate structuring and

legal compliance in cross border M&A.

• Global work experience in Asia, Europe and Americas
• Has wide experience of 12 years in corporate legal structuring and

deal finalizations across geographies.

Art Holbrook MBA - Board

• Graduate of Harvard Business School. Has over 30 years of

entrepreneurial experience in multiple businesses serving in various capacities as President, Principal and General Manager.

• Member of the Board of Directors of several private equity owned

ventures.

• Founded multiple private equity startups.
• Led a successful acquisition of privately held investment in the Cable TV

and Satellite Communication industry. (successfully operating, horizontally expanding and ultimately selling the businesses)

5/11/2011 ALCOR - Strategic India Market Entry 39

Jim Ward - Board

• 25 years experience in the manufacturing space from Aerospace to

Automotive, and has

• led teams for dynamic growth of companies in North America. Jim also

has

• varied expertise in cross border dealings
• set up multiple Joint Venture operations and focuses on bringing in
• utstanding results

Mike Katz MBA - Board

• Graduate of Harvard Business School
• Successful track record of turning around companies into highly

profitable units.

• Built growth and leadership in corporations.
• Has worked with GE and Cummins in various senior positions

across the world.

Sunil Bedekar - Execution Team Head

• Chartered Accountant and Former CFO with Deepak Fertilizers, Endurance,

Bharat Forge .

• Track record of growing companies by 6X through cross border acquisitions,

business transfer and mergers.

• Detailed and complex cross border financial structuring experience

5/11/2011 ALCOR - Strategic India Market Entry 40

End to End Solution One Stop Solution

America/ Europe Market

Research team identifies companies who can use ALCOR Growth Strategies. Global Staff approach and present growth strategies. M&A Process commences. ALCOR is engaged for 5 years.

India/China Market

Research Team identifies companies who can partner with agreed American/Europe-an companies. India Staff approach and present growth strategies. M&A Process commences ALCOR receives commitment and co-engaged for 5 years.

Effective Knowledge management : ALCOR Global Team

5/11/2011 ALCOR - Strategic India Market Entry 41

Engagement Letter of Intent Term sheet Business Plan Modeling Agreement+ Financial Model JV Agreement (draft) & structuring Success : & Share transfer Ongoing 5 year support

5/11/2011 ALCOR - Strategic India Market Entry 42

We are local, and we know the market conditions, the players and the

• pportunities.

We have feet on the ground in 50 plus cities, coupled with our experience and growth strategies with dynamic execution , makes ALCOR ideal choice

5/11/2011 ALCOR - Strategic India Market Entry 43

Assist the Company to leverage globally Deploy Private Capital through Finance

• r Equity

Provide end-to-end solutions. Develop Growth Strategies & mitigate risks. Evaluate Opportunity and Potential. Conduct Due-diligence.

Win-Win to build fair and mutually rewarding long term solution.

5/11/2011 ALCOR - Strategic India Market Entry 44

• Identify and set target parameters and then visit.
• Letter of Intent (post visit to Indian companies)

Primary visit potential Indian companies

• Business Plan and Financial Model
• Term Sheet

Visit by Indian Company

• Acquisition/ JV Agreement
• Shareholders Agreement

Acquisition/ JV Structure/Contracts

5/11/2011 ALCOR - Strategic India Market Entry 45

5/11/2011 ALCOR - Strategic India Market Entry 46

Alcor Fund

www.alcorfund.com

5/11/2011 ALCOR - Strategic India Market Entry 47