Engineering major L&T on Monday made a hostile bid to take controlling stake in Mindtree. It has entered into an agreement with Mindtree’s single-largest investor, V G Siddhartha, to purchase his entire 20.32 per cent stake for ~3,269 crore. It is also eyeing an additional 46 per cent through market purchase and an open offer.
Mindtree on Tuesday appealed to the larger Indian tech community, with co-founder Subroto Bagchi saying that L&T’s move will be taken as a bad precedent for the whole information technology (IT) sector and also for start-up entrepreneurs who aspire to build large institutions.
Start-up founders, however, are looking at the subject with a more practical lens.
“This is being looked at as an insider (Mindtree) versus outside (L&T) issue,” said a Bengaluru-based technology start-up co-founder.
In their quest for expansion, getting funds for the next big project, bringing in a bigger player to make their product a success, younger companies
seem more amenable to the idea of a takeover. Unlike the older tech players, they are more used to the idea of change.
“It seems everybody is looking for a better deal,” the start-up co-founder added.
The tussle is expected to stretch out as Mindtree looks unwilling to cede control. Mindtree employees even tweeted #MindtreeMatters over the last two days, making emotional appeals to not dilute the culture of themed sized IT firm.
Experts are looking at it as a financial deal and question if Mindtree will be worth the value that L&T wants to pay for it.
“I don’t see it as a hostile takeover,” said Sanjoy Sen, senior research fellow in strategy and governance, Loughborough University, UK. “It was initiated by a Mindtree shareholder (Siddhartha) making an offer to L&T, so the entire chain was triggered by a key stakeholder.”
He added though that the entire tussle shows the value of smaller IT firms, and the key will be to see if it impacts employee morale at Mindtree. “If (by the end of the deal) the talent that owns the customer relationships is not there, will L&T still get the value it is looking for?”