Unit – IV

Creating High Performance Strategic Alliances

It is easy to get caught up in the excitement that surrounds alliances. During the 1990s
corporations went on a binge of collaborative relationships. Technology based
companies such as Pfizer, Dow Chemical and IBM created collaborative R&D alliances
to quickly access technologies. United Parcel Service and Pepsi-Cola created alliances to
access markets that were too costly, or too geographically distant to serve.

Quite the contrary, numerous studies show that 70% of alliances fail! These tools are
practical roadmaps that build alliance competence into the fabric of the firm.

The Alliance Challenges

There are three challenges every manager faces as he/she begins an alliance activity. The
first is overcoming the “3 alliances in 1” problem. Simply put, every alliance is really
three separate but interrelated relationships. The obvious relationship is the external
alliance between the two firms. The two hidden relationships are the internal alliances
within each firm.

If key groups inside company A, such as R&D, marketing, and manufacturing do not
agree on the goals, objectives, resource needs and intent of the alliance, the relationship is
at risk. Achieving internal alignment does not come easily unless the firm has an
effective process for exposing and resolving internal differences. The Alliance
Framework® is that process.

The second challenges is to put together a high quality alliance …. quickly. When firms
use the “ad hoc” approach to plan an alliance, months go by. By the time the alliance
agreement is signed, resources are frittered away, good will is strained, and the initial
financial assumptions are no longer valid. It is no accident that the Alliance Framework®
was created in the electronics industry. With product lifecycles of 18 months, electronics
companies do not have a year to consummate a deal. They must create a high quality
alliance, quickly. Using the Framework, our personal goal is to know that two firms will
not create an alliance in eight weeks. If a deal is possible, another eight to twelve weeks
is needed.

The third challenge is flawless implementation. Too many alliances fail because team
members from both sides do not understand the complexity of coordinating resources
across organizational boundaries. How do firms integrate their skills and resources,
while protecting their know-how and trade secrets? What do we know about resolving
cultural differences? When should managers make key interventions and what are those
interventions? Answers to questions like these are the heart and soul of the Alliance
Implementation Program™.

OUR OFFERING

The Alliance Framework

The Alliance Framework® is the state-of-the-art alliance planning tool. It significantly

increases the quality of the relationship and decreases the time needed to reach a mutually
acceptable agreement. Working with client teams, we create links between the business
plans of both partners and the key provisions of the alliance contract. By including
people from each internal group that will provide resources to the alliance, we facilitate
stakeholder buy-in, and establish clear communication channels across organizational and
cultural barriers. The Alliance Framework was created by executives who have over 45
years of collective alliance experience. It is the alliance creation process of choice in
sophisticated alliance companies.

Alliance Implementation Programme

This systematic program gives newly created alliances the highest probability of success
by training team members in both firms in the “best practices” of alliance management.
It includes tools, metrics and management techniques designed to:

 Support collaborative decision-making

 Protect the proprietary knowledge of both firms
 Coordinate inter-firm and intra-firm decision making
 Integrate resources across corporate boundaries
 Provide managers with effective conflict resolution strategies
 Manage cultural differences, both corporate and national
 Establish and maintain trust in the relationship

Alliance Turnaround Program

This program is designed to assess the status of a distressed alliance. In cooperation with
the management teams of both firms, we identify leverage points and barriers to the
success of the relationship. We work with the responsible managers to develop and
implement a set of action plans designed to improve the working relationship between the
partners and the performance of the alliance. If the alliance is not salvageable, we
recommend termination.

On-Site Training Programs and the Alliance Simulator™

We provide an advanced course on Creating and Managing Strategic Alliances. This

intensive program is held at the client’s site and is tailored to your specific needs. The
highlight is the Alliance Simulator™ which brings the team through a very complex,
international, technology and marketing based deal. Managers experience all of the
detonators in alliance management – first hand- in the Alliance Simulator.
CREATING AND MANAGING STRATEGIC ALLIANCES WORKSHOP

PURPOSE AND APPROACH

The purpose of this intensive workshop is to help alliance managers and their teams
understand the best practices of creating and managing strategic alliances. That
knowledge is then applied to the group’s current or proposed alliances. This workshop is
based on the experience of AMG consultants in working with Fortune 500 firms in the
pharmaceutical, chemical, consumer products, electronics, and other industries.
1; The Strategic Use of Alliances:

 How do companies strategically use alliances well and poorly?

 How can alliances constrain a firm as well as provide strategic flexibility?
 What are the fundamental early planning requirements for a successful alliance,
and what mistakes are often made?
 What is the competitive positioning tool and how can it define the short list of
potential partners?

2; The Alliance Framework

 What is an "Alliance Framework", and why is it so important (and challenging to

prepare)?
 Who should be on the alliance planning team, and what are their responsibilities?
 How is the short list of prospective partners evaluated, and what are the most
important questions to ask in first meetings with such prospective partners?
 How is the Alliance Framework used in the negotiation process?
 How can dealkillers be identified and dealt with?
 What are the dynamics of a negotiation, and what are the impacts of corporate and
national cultures?

3; Implementation: building a strong working relationship with the partner:

 How do successful managers coordinate resources across organizational

boundaries?
 What can managers do in the negotiation phase to accelerate alliance
implementation and goal achievement?
 Why is it vital that managers identify and link the decision making structures of
the two firms? How is that done?
 What tools and techniques are effective for resolving conflict in the alliance?
 How can managers deal with cultural disconnects (both national and
organizational)?
 Why do cross-functional teams become less important as the alliance matures?
What management structures replace them?
  What are the early warning signs of trouble? What should managers do about
them?
 How can an alliance that is not meeting expectations be turned around?

Managing Technology-Based Strategic Alliances Between Large and Small Firms

Gene Slowinski, Ph.D.. Graduate School of Management, Rutgers University

Gerald Seelig, Executive Vice President, Allied Signal (retired)

The Structure of the Study

This article is based on a seven-year longitudinal study of 50 strategic alliances. In 1987-

89, in-depth interviews were conducted with operating managers on both sides of 50
alliances: Operating managers in large companies and the small companies responded to
the identical 10-page questionnaire. In this way, we were able to observe each of the
alliances from the perspective of both firms. To encourage candor, we guaranteed
anonymity to our participants and ensured them that their partner would never have
access to their responses. Of the 50 alliances, 21 were in the field of biotechnology, 21 in
electronics, and eight in machine vision.

This study also included a three-year follow-up. We were able to contact 38 of the
original 50 alliances, of those, only 50% had survived the three years. The results
reported in this article reflect the best practices identified during the seven-year study.

Introduction

The business world is innovative, frequently experimenting with new structures and
relationships, Traditional strategies for growth and diversification that focused on
mergers and acquisitions have been supplemented by a variety of joint-venture
arrangements, leveraged investments, licensing and royalty agreements, and so on. Over
the last 10 years, a new business relationship has become popular: strategic alliances,

Typically, strategic alliances are an attractive option when a large firm has identified a
significant Opportunity in one of its existing markets, in general, the large firm has most
of the capacity needed to address the opportunity but lacks one critical element:
technology. By teaming with a world-class small partner, the large firm hopes to
participate quickly in the emerging market and gain a competitive advantage.

To explain the goals and expectations of the two companies that undertake a strategic
alliance, it is easiest to first state what the relationship is not. It is not primarily an equity
investment. There are many instances where a large corporation takes a minority position
in a start-up venture believed to have a technological edge in a promising new product or
process. These investments are usually made by the finance department and have as their
objective a high return on investment for a recognized high risk. Typically, many pension
managers set aside a small percentage of their portfolio for these types of higher-risk
investments. In almost all cases these relationships are financial, not strategic. The large
company does not seek the small company's technology, nor does it want to involve itself
in the operations of the small firm. At most, the large company will place someone on the
Board of Directors to protect its investment. Whet is absent is an agreement to jointly
exploit the success of the small company's research and development and the interaction
of operating personnel in both firms.

If a corporate decision is made to pursue the strategic alliance option, exploratory

discussions begin. The interests of the two parties are both complementary and
conflicting3. They both want the technology, which brought them together, to succeed
and become a marketable commercial product or process. Generally, each recognizes its
own strength and weakness and the benefits of a synergistic relationship. On the other
hand, there are clearly interests that are different. The small company wants various types
of financial and non-financial assistance, yet wants to retain maximum independence.
The large company wants to cautiously dole out funding and maintain close monitoring if
not control of the effort it is supporting. These issues must be discussed and resolved or
they will threaten the alliance.

A number of other issues are important as well. A thorough understanding and agreement
by key management people of both companies on the objectives and ground rules for the
alliance is a necessary prerequisite for success.3 These discussions must deal with hard
issues such as who will be in charge of R&D, production, marketing, and other functions;
which decisions are to be made by each company; which decisions must be approved by
both companies; and how disputes should be resolved. If there are either basic differences
or too many minor differences, the whole question of whether to proceed with the
alliance needs to be re-examined

Partnering vs. the Alternatives

It is worthwhile to review the evolution of strategic alliances. Not too many years ago
when an established large company wanted to enter a new product line quickly or rapidly
acquire a new technology it would "buy into" that technology by acquiring a small
company that had successfully developed it. The process was standard and simple. The
founders of the small company, who were also the key em-ployes and owners, were made
offers they couldn't refuse. They sold their companies and became rich employees of the
large company. Within a short time the former entrepreneurs became frustrated with the
bureaucracy of the large company and left. In too many cases the objective of the
acquisition was not realized, primarily because the entrepreneurial spirit and incentives of
the small company were incompatible with the culture of the large firm.

The desire of large companies to get into new fields quickly remains, and strategic
partnering provides an alternative to the acquisition approach. This alternative is
particularly attractive when the large entity is interested in only a subset of the skills and
resources of the small firm.

In a strategic alliance, the small company remains independent. The entrepreneurs work
in their own culture, driven by their own incentive system. However, by teaming up with
a large company the small firm has access to capital and organizational resources that are
unavailable in the marketplace, such as an in-place manufacturing and/or marketing
organization, distribution channels, and regulatory groups with years of governmental
experience. To be sure, entrepreneurs must give up some fights and opportunities. These
may include the loss of marketing rights in select industry sectors or in certain parts of
the world. Alternatively, they may share the production responsibilities or even give up
production rights completely. However, the trade-off may be unavoidable because many
of the needed resources cannot be acquired elsewhere. Each case is unique and each case
is a trade-off. In the best situation the relationship is truly symbiotic; what each gives up
is small compared to what each hopes to gain

This thinking and its conclusion are not universally accepted. Many large companies
reject the option of teaming with a small start-up company and prefer to build their own
in-house technical capability, particularly if the small firm is a new venture organized
around a small group of technical experts. The in-house attitude ~s usually presented as
"give us the R&D dollars and we can build as strong or stronger a technical capability as
that handful of 'experts' '" This form of "not-invented-here-syndrome" is quickly giving
way to multi-company cooperative arrangements as the cost of technology rises and the
lead time to gain a competitive advantage shrinks.

Another alternative to partnering is licensing a small firm's technology. While licensing

has many advantages, it has one major shortcoming; it is an after-the-fact activity. Simply
stated, a firm can only license existing technology. Licensing precludes large firm
involvement in the d~recnon of development or the technical characteristics emphasized.
More important, it is often difficult to transfer the technology between the scieqtists of
small firms and large firms. Partnering overcomes these obstacles by allowing the large
firm to actively participate in all phases of the research.

Managing Toward Success

While alliances can be a powerful tool for achieving a company's strategic goals, not all
strategic alliances are successful. In one case, familiar to the authors, the large firm
repositioned its strategic focus away from the alliance's product, rendering the alliance
obsolete. In another instance, the large firm experienced financial difficulties and cut off
funding even though the alliance was a technological success. In a third situation, a key
executive at the large firm was promoted and transferred out of the alliance. Without his
mentoring the relationship quickly deteriorated. In each of these cases, technological
synergy was undermined by some other factor. Our point is simple: synergy is not
enough. Collaborative management, mutual need, and the ability to work in the culture of
another organization are factors that must be present if the alliance is to succeed.

Once a corporate decision has been made to pursue the strategic partnering option, what
small-firm characteristics should the large firm look for and how can the chance of
success be maximized? The remainder of this article will examine three key events in the
life of alliances and suggest options for better managing these events. S pacifically, we
will discuss choosing the partner, negotiating the alliance, and managing the collaborative
process.

Choosing a Partner

The basic foundation of a good relationship is the choice of the right partner. But what
are the characteristics of the right partner? First, the partner selection process should
identif3' organizations whose needs, skills, and resources are completely complementary
to those of the large firm. This point cannot be over-emphasized. All too often, what
seems like a perfect fit turns out to be a mismatch. In one case, a small firm with a
promising medical device entered into a relationship with a large pharmaceutical firm.
The large companies' in-hospital sales force was thought to be an excellent marketing
outlet for the device. However, once the relationship was under way, it became obvious
that a mismatch had occurred. While the sales force had a tremendous ability to contact
individual doctors and sell drugs on a one-on-one basis, the medical device needed a
marketing group that could influence department heads and hospital administrators to
commit a substantial amount of funds and back the introduction of the new equipment.
The mismatch resulted in lackluster sales and the relationship terminated

A second selection criterion is the choice of a partner that is financially stable and well
managed. It can be a source of frustration when large-firm executives become involved in
a combination alliance and turnaround situation. All too often, large-firm executives
working with poorly capitalized partners are drawn into non-partnership related issues
such as venture capital funding and negotiations with suppliers. These problems draw
energy away from the common goal and divert attention from the activities of the
alliance.

In addition to these obvious criteria, some of the more subtle small-firm characteristics
also require attention. Relationships as complex as these benefit from experience. A small
firm that has been engaged in previous alliances has moved up the learning curve at the
expense of an earlier partner. One president of a small electronics company freely admits
that his initial alliances could have been more effective if he and his partner had been
more experienced in cooperative management. Fortunately, many entrepreneurial firms
have a great deal of experience in this area. One biotechnology company with 130
employees is currently engaged in 13 alliances. That firm considers cooperative
management the norm not the " exception, and views partnering as a core competency of
the firm.

Negotiating the Alliance

As mentioned, there are many variations to any strategic alliance agreement. Each
bilateral engagement is different and depends on each partner's needs. The common
denominator for all successful agreements is the willingness of each side to openly
describe its requirements, both those that are fundamental and those that are nice to have,
but not essential: A complete understanding of what each is expected to contribute, and a
realistic assessment of each party's ability to deliver is a prerequisite to a successful
relationship. This point is emphasized because the authors believe that many of the
conflicts that occur during implementation could have been identified during the
negotiations. It is here that differences, be they of substance or style, should either be
resolved or the negotiation~ terminated.

The terms and conditions of any agreement are the result of the perceived requirements of
the parties negotiating as well as their skill. As in all negotiations, both sides must be
convinced that their key needs are being satisfied and that the agreement is fair, otherwise
the alliance is at risk from the start. There must be clauses in any agreement that
stipulates when and how the alliance is to be terminated, but the emphasis in negotiations
should be on structuring the alliance to succeed. Therefore, most of the effort should be
spent on defining who is responsible for what, when, and how. Equally important is the
issue of who pays what and when, and who is entitled to the benefits of the alliance.
Ultimately, the best assurance that a relationship will be long and mutually beneficial is
when both parties are convinced that they really need each other to achieve their goals.
That must be the core of any agreement.

The following are two examples of the shapes that alliance arrangements can take; each is
a situation in which one of the authors participated. The terms and conditions described
are not meant to be a model for all strategic alliances. Rather, they are presented to make
the point that alliances benefit from negotiations based on a clear understanding of both
firms' needs, expectations, and goals. When both firms understand the objectives and
constraints of the other, a truly "win-win" alliance can be formed.

The first was an alliance that was successfully implemented and continued until the
business was divested by the parent corporation more than two years later. The decision
to seek a strategic partner was made when the scientific sector of a multi-billion dollar
corporation decided to participate in the then emerging field of human diagnostics. The
parent corporation had considerable biotechnology experience but lacked the specialized
talent to perform R&D in genetic-based diagnostics. After evaluating and rejecting a
number of alternatives, including developing an in-house capability, it was decided to
seek a small but highly competent R&D-oriented biotechnology firm for a partnering
arrangement.

Following the evaluation of about a dozen candidates, a potential partner was identified.
The initial discussions were frank and uninhibited but cordial. The large company
representative explained their objectives and expressed their willingness to structure an
arrangement that would benefit both parties. In return for the opportunity to tap the
research potential of the small firm's scientists, the large company would provide the
financial resources plus the production and marketing capabilities to exploit any
promising development.

The small, technically sophisticated company also discussed its strength and weakness. It
wanted to become a significant player in the biotechnology field but realized that it would
take years and financial resources beyond its means to build the manufacturing and
marketing infrastructure necessary. The smaller company made it clear from the outset
that it wanted to remain independent and focus its a6tivities on what it knew best,
research and development.

After many meetings, an Outline of Understanding was prepared and signed by the
managements of both companies. It was only at this point that lawyers were introduced.
The agreement included the following key provisions:

(1) The multi-billion dollar firm agreed to buy a 16% equity position for $10 million.
(2) The small firm agreed to initiate an R&D program in human diagnostics using genetic
technology. This R&D would be funded by the large corporation for a minimum of three
years at a designated dollar amount. There were options for each party to renew or
terminate the R&D at the end of three years.
(3) The selection of specific R&D projects was a joint responsibility; as was the decision
to redirect or cancel any R&D project.
n
(4) The large corporation had a exclusive license to all technology in the field of human
diagnostics resulting from the R&D effort.
(5) If and when the large corporation commercialized and sold products that were derived
from the R&D program, it would pay a royalty rate which varied and was based on a
number of factors including patent rights, sales volume, and elapsed time.
(6) The agreement included the conditions under which each company could give notice
of termination.
(7) A final and important provision defined the process for resolving disagreements. This
included mediation and arbitration procedures that would minimize any cost and stress of
litigation. Once the final agreement had been reviewed and properly signed, the
cooperative venture proceeded with only normal start-up clarifications. In the second
example, a start-up company initiated alliance discussions with a large established firm.
The founders of the entrepreneurial firm were highly experienced technologists who had
built a worldwide reputation in a special but important niche and had been granted scores
of patents. They established their company to develop state-of-the-art equipment for
semiconductors, and they made two basic decisions when creating the firm. First., they
did not want to seek traditional venture capital funding as their primary financing.
Second, they did not want to become a production company. The founders had been
engaged in R.&D all their lives and were confident of their abilities in this area: they
were less sure of their manufacturing and marketing skills. Consequently, they decided to
transfer the know-how of any new product or process to a major electronics corporation
that had appropriate production and marketing capabilities. Furthermore, they would
assist the latter to become self sufficient and exploit the full potential of the research in
the marketplace. With this strategy, they searched for partners who could manufacture
and effectively market advanced semiconductor devices. The start-up is currently in the
initial stages of negotiating with a major international firm whose strengths in
manufacturing and marketing complement its technical expertise.

The arrangement being discussed calls for the small firm to initiate the necessary
development and design effort and achieve specific technical objectives. Once this has
been accomplished, the small firm will transfer all documentation, equipment and know-
how to the partner. In addition, adequate training will be provided to assure efficient
operation by the recipient company. In return, the large international corporation agrees

1. to contract and fund the development and design effort for at least two years;
2. to negotiate a licensing agreement for royalty payments to the small company for
all products it manufactures with the advance: l technology;

3. and to invest in the start-up company, the dollar value and equity position to be
determined during negotiations. It is understood, however, that the equity position
will be relatively small (less than 20%).

These are the key elements in a management document of about six pages currently being
reviewed. Even though the outcome is unknown at this time, the important point is that
the relationship is being structured to be mutually beneficial as well as to protect both
sides.

Managing Toward Collaboration

Once the corporate decision has been made to exercise the alliance option, managing the
relationship becomes the focus. Setting the goals and milestones should be a joint activity
involving operating managers from both firms7 an exercise serving a number of functions.
First. it acts as an initial cooperative exercise for the managers and assures that all key
operating people are aware of informal as well as formal agreements made during
negotiations. This can be important because operating managers are not always involved
in the negotiations and can be unaware of informal agreements. In addition, setting goals
and milestones gives the operating managers an opportunity to develop a personal rapport
important to success.g Time and again our study has shown that the personal relationships
that develop between the key managers is central to the success of the relationship?

Managing toward collaboration includes managing conflict. In the course of every

alliance conflict occurs and can be seen as a breakdown or a breakthrough for the
relation-shi p. Unfortunately, few managers have been trained m the art of conflict
resolution. Fewer still understand that the best time to resolve conflict is while the issue is
small and still resolvable.

In an effort to learn how to resolve conflict in a cooperative relationship one of the

authors spent time with a marriage counselor. One of the mare causes of conflict in
marriages is different sets of expectations. This is a key contributor to conflicts in
alliances as well. What are Company A's expectations? What are Company B's? When
these expectations track one-to-one the alliance is on a strong foundation. The further
expectations diverge, the greater the risk

Conclusion
Cooperative strategies are becoming increasingly important for large corporations
because technology continues to drive many important markets. The rapid advance of
knowledge in many fields and the growing technical sophistication of our customers are
driving us to cooperate with specialist firms. Strategic alliances represent one of the more
innovative methods of cooperation, and they are being actively exploited.

Large companies with an existing market position have a great deal to gain from these
relationships. Benefits may take the form of product line extensions or the improvement
of existing products. Another type of large firm that finds these relationships effective is
the company seeking to develop new sources of raw materials using the small firm's
technology. Many of our biotechnology alliances are devoted to the creation of new
sources of high-quality raw materials for the large firm's production processes.

Other uses of alliances may be less successful. Large firms who enter alliances primarily
for equity investment or as a window on technology may find them disappointing. This
may be particularly true when the small firm sees the relationship as a commercialization
opportunity. Simply stated, the goals of the small firm may be very different from the
goals of the large firm. When the partners are working toward different goals, the
likelihood of success is small.

After weighing the costs and benefits of alliances, a decision to proceed should be
tempered by what we argue are the best tactics for managing these cooperative relations.
In summary, partner selection methods should maximize compatibility and
complementarity. Tailor-made contract~ negotiated specifically for the alliance should
provide milestones that establish clear objectives even though they are likely to be
modified or possibly abandoned. Developing conflict resolution techniques that can help
managers resolve problems while they are small and still solvable is an important
collaborative step. Finally, the managerial process must be a collaboration in which the
large corporation is neither a dictator nor a silent partner but rather an active participant
in most if not all areas of the venture. Implementing such design roles for managing
alliances is likely to improve their chance for success, especially in high technology
areas.
 HDFC Bank to acquire Centurion Bank in $2.4 billion share-
swap deal (29 February 2008)
New Delhi - India's second largest private sector bank, HDFC Bank, has
struck a deal with smaller Centurion Bank of Punjab to buyout the latter.

As per the terms of the deal, Centurion Bank shareholders will receive one
HDFC Bank share for every 29 Centurion Bank shares.

The Rs.9510 crore ($2.4 billion) share-swap deal, touted as the nation's
biggest financial sector buyout, will create a bank with 1,148 branches,
surpassing largest private sector bank, ICICI Bank's 955 branches.

Centurion had 394 branches and HDFC Bank 754 branches as on Dec. 31
2007, HDFC Bank said in a regulatory filing, Feb. 22.

However, the merged entity's total advances of about Rs.87,000 crore

($21.75 billion) are far lower than ICICI Bank's Rs.2,20,000 crore ($55
billion).

In terms of assets too, ICICI Bank is much larger than the proposed new
entity. While ICICI Bank has assets of Rs.3,76,700 crore ($94.2 billion), the
proposed combined entity would have over Rs.1,10,000 crore ($27.5
billion).

The combined entity could have a market capitalization of about Rs.63,000

crore ($15.75 billion), based on their current market values. On the other
hand, ICICI Bank is valued at $30.7 billion.

"The two Boards have resolved to pursue the merger subject to

satisfactory due diligence, a fair share-swap ratio and all the requisite
statutory, regulatory and corporate approvals," a joint statement issued by
the banks said.
The merger will allow HDFC Bank to extend its reach in the country before
a central bank review next year that may allow foreign banks such as
Citigroup and Standard Chartered to buy Indian lenders.

In the past, both HDFC Bank and Centurion Bank aggresively carried out
acquisitions. While HDFC Bank bought Times Bank from media publisher
Bennett Coleman & Co. in 2000, Centurion, which was rescued by buyout
firm Sabre Capital in 2003 after major losses, bought Central Bank of
Punjab in 2005 and Lord Krishna Bank in 2006.

Bank Muscat and Sabre Capital are the two major shareholders of
Centurion Bank, owning 14.02 percent and 3.74 percent respectively, as on
Dec. 31, stock exchange data showed. Bank Muscat said it had no plans of
selling its smaller stake in HDFC Bank after its takeover of Centurion.

HDFC Bank has a promoter holding of 23.28 percent, held jointly by HDFC
Ltd, HDFC Investments and HDFC Holdings. HDFC will invest Rs.3900 crore
($975 million) in HDFC Bank to maintain its shareholding in the Mumbai-
based lender. However, HDFC has no plans to merge with HDFC Bank,
chairman Deepak Parekh said.

KPMG and Ambit Corporate Finance are advising the banks in the deal. The
swap ratio was based on the recommendations made by joint valuers Dalal
& Shah, a chartered accounting firm, and Ernst & Young, a tax consultancy
and audit firm.

According to market analysts, the merger will give HDFC Bank a major
boost as it will be able to consolidate its presence in southern India,
especially in Kerala, where Centurion Bank has a concentration of
branches.

Besides adding 2.5 million Centurion Bank customers, HDFC will also have
access to talent. Earlier, HDFC Bank managing director Aditya Puri said a
limited supply of skilled workers has made it tougher to expand in India,
where the lender trails State Bank of India (SBI) and ICICI Bank. "We are
dying for people," he said. Puri is expected to head the merged bank.
"We will also acquire a strong SME (small and medium enterprises)
portfolio from Centurion Bank. There is no overlapping of HDFC Bank and
Centurion Bank customers," a HDFC Bank official said.

Centurion Bank chairman Rana Talwar said the merger will help the bank
compete with Indian and foreign rivals and was a better option than a
possible acquisition by a foreign bank.

"This was a far superior option to waiting till 2009 and waiting for some
foreigner to write a big cheque," Talwar said.

This is the precursor of many more acquisitions, mergers and

consolidations. In India's financial sector, we don't have ? global scale yet.
But over a period of time, there will be fewer, stronger, better capitalized
banks," he added.

"Most Indian banks are not (of a) great size. To tackle foreign banks, there
could be more mergers. Most Indian banks are regionally focused," said
one analyst with Religare Securities.

The deal "is positive for HDFC Bank as it has become more difficult to set
up branches and get talent," said Sandeep Sabharwal, who oversees $3.2
billion as chief investment officer at Mumbai-based J.M. Financial Mutual
Fund. "However, shareholders of Centurion Bank could be disappointed as
they expected a ratio of about 1:25."

Analysts say the merger will only help HDFC Bank increase earnings.
Merrill Lynch analysts Rajeev Varma and Veekesh Gandhi, in a note said
that the merger gives an opportunity for HDFC Bank to leverage Centurion
Bank's deposit base and distribution more effectively.

"We reckon it could help potentially take return on equity to around 20

percent by FY10," the analysts said.

"The merger gives HDFC Bank on a platter a year plus of growth, and a 50
percent increase in its banking network. There are synergies the banks
can benefit from - Centurion Bank has a strong presence in high-yielding
retail loans, while HDFC Bank has been very good at raising low-cost
deposits," said Shriram Iyer, head of research at the brokerage Edelweiss
Capital.

SOURCE- [Link]
[Link]

Team India committed to hosting best Commonwealth Games

ever (Wed, 03 Feb 2010 )

Central Bank of India to sell tickets through its branches

New Delhi: Speaking at the occasion of the inauguration of the first ATM for the games
by Central Bank of India, the Official Banker for the XIX Commonwealth Games 2010
Delhi at the OC headquarters, Chairman of Organising Committee Commonwealth
Games 2010 Delhi Mr. Suresh Kalmadi, MP, thanked Prime Minister Dr. Manmohan
Singh, Sports Minister Dr. [Link] and Mrs. Sheila Dikshit, Chief Minister of Delhi for
their personal involvement and deep commitment and support in upholding the vision of
the Organising Committee of holding the best ever Commonwealth Games.

"Team India is working towards the success of the Commonwealth Games" he added.

Mr. Kalmadi also stressed on the partnership with Central Bank of India, the first
Swadeshi Bank of India and outlined that the partnership would see Central Bank of India
retailing the tickets for the XIX Commonwealth Games 2010 Delhi across its vast
network in the country.

"Our partnership with Commonwealth Games has started with Shera, the official Mascot
of the Commonwealth Games being the first to withdraw cash from the ATM. We are
going to ensure that we partner the Organising Committee in hosting the Games
successfully. We will use our strong network to convey the spirit of sportsmanship and
take the message of Commonwealth Games across India" said, Mr. S. Sridhar, CMD,
Central Bank of India.

Outlining the progress made so far Mr. Kalmadi said, "Delhi is getting a sporting legacy
on account of the rapid infrastructure development we are seeing in the city. Metro, world
class airport will propel Delhi as a modern city with top amenities and will pave the way
for further sporting action for the country."

Expressing his delight at the inauguration of the ATM, Mr.T.S. Darbari, Joint Director
General, Organising Committee Commonwealth Games 2010 Delhi said that, "Through
this partnership Central Bank of India has access to a global platform of the
Commonwealth nations which can assist the bank to achieve a higher intyernational
presence. Powerful synergies can evolve in the activity of the Commonwealth Business
Club of India."

Also present at the occasion was Mr. Parimal Rai, Chairman, NDMC who congratulated
the Organising Committee and Central Bank of India in starting a new chapter as a lead
up to the Games.

SOURCE:- [Link]
 Tata-Bruker offers CBRN vehicle for CWG
(Tuesday , Feb 16, 2010 )

With security becoming a major concern during the coming Commonwealth Games here,
an UK-based chemical, biological, radiological and nuclear (CBRN) detection solution
manufacturer has offered a reconnaissance vehicle for use during the major sports event
in October this year.

Vasus, as the CBRN vehicle produced by the Tata’s in India is called, has been showcased
during the ongoing DefExpo here.

“We have offered this vehicle, which can detect any leak of deadly chemical, biological,
radiological and nuclear substances within a five-km radius, to the Home Ministry and
the National Disaster Management Authority (NDMA) for use during the Commonwealth
Games,” UK company Bruker Detection’s representative said here.
With the threat of terror groups laying their hands on CBRN substances to mount an
attack on civilian population increasing in the recent years, the vehicle would come in
handy to immediately detect such leaks and to contain it, he said.

UK Trade and Investment Defence and Security Organisation’s head Richard Paniguian
said his country realised that the security threats faced by India, which is hosting the
CWG this year, was similar to that of Britain, which would host the 2012 Olympics.

“Hence we have offered this vehicle, produced in India by Tata with British technological
help to the Home Ministry and NDMA for use during CWG,” Paniguian said.

SOURCE-[Link]
vehicle-for-cwg/580509/