Strategic Sale of Satyam Computers
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Case Code: BSTR337 Case Length: 20 Pages Period: 2008-2009 Pub Date: 2009 Teaching Note: Not Available |
Price: Rs.300 Organization: Satyam Computer Services Limited, Tech Mahindra Limited Industry: Information Technology, Software Services Countries: US Themes: Mergers and Acquisitions |
Abstract Case Intro 1 Case Intro 2 Excerpts
"There is a palpable sense that Satyam is going to be a viable and strong entity. This is based on the personal communications I have been receiving and my interactions. Satyam is not a sinking ship, though it is not a racing craft yet"
- Anand Mahindra, Vice-chairman and Managing Director, Mahindra Group and Chairman, Tech Mahindra in 2009.
"The Board and the Indian government worked together to induct a strategic investor in record time. I am pleased to learn that Tech Mahindra is eager to maintain that pace. They've lost no time in moving onto next steps."
- Kiran Karnik, Chairman of the Government Appointed Board at Satyam, in April 2009.
"The concern several clients expressed to Forrester is about some of the bidders and Tech Mahindra's inclusion as it is not exactly present in the domain and the lines of services of Satyam like manufacturing, auto, aero, or in terms of life science services, enterprise applications, engineering services. So, clients would be concerned. If I am a manufacturing company who used to use Satyam for mechanical engineering design, now the company has been bought by a company, which is specializing into telecom."
- Sudin Apte, Senior Analyst, Forrester Research, in April 2009.
Resurrection of Satyam
On April 13, 2009, the government appointed board of India-based Satyam Computer Services Limited (Satyam) announced that Tech Mahindra Limited (Tech Mahindra), a joint venture between the India-based conglomerate Mahindra & Mahindra and the UK-based BT Plc had been chosen as the preferred bidder for the acquisition of the beleaguered Satyam.
Satyam found itself in deep trouble after its founder and Chairman, B. Ramalinga Raju (Raju), on January 07, 2009, claimed that the company had been inflating the revenues and profit figures for the last several years. He confessed to an accounting fraud that amounted to Rs. 70 billion. With Raju's confession, a cloud of uncertainty hovered over Satyam. The future of over 50,000 employees and the numerous IT projects that Satyam had undertaken for companies across the world hung in the balance. At this juncture, the Government of India intervened and constituted a new board for the company.
The board immediately reassured Satyam's employees and clients, raised money for working capital, and appointed new auditors to restate the accounts. With the approval of the Company Law Board (CLB) and the Securities and Exchange Board of India (SEBI), the Satyam board started on the process of identifying a strategic investor for Satyam and specified the rules and regulations for the bidding process...
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