Wipro's Inorganic Growth Strategy
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Case Code: BSTR427 Case Length: 17 Pages Period: 2007-2013 Pub Date: 2013 Teaching Note: Not Available |
Price: Rs.400 Organization: Wipro Industry: Diversified Countries: India; Asia Themes: Growth Strategy, Mergers & Acquisitions, Post Merger Integration |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
On December 10, 2012, Bangalore, India-based Wipro Consumer Care and Lighting (WCCL), the fast moving consumer goods (FMCG) arm of information technology (IT) major Wipro Limited, acquired LD Waxson, a Singapore-based FMCG company. The 100% acquisition was an all cash deal of US$144 million (about Rs. 7.84 billion), 2.1 times that of LD Waxson's expected 2012 sales turnover (US$68 million). It was the fourth global deal for WCCL and its second largest. Wipro was established as a seller of vegetable oils in 1945. But in 1975, it started diversifying its operations into various sectors like software and IT services, infrastructure engineering, lighting, furniture, etc.
Though it started diversifying on its own, it later took the inorganic route to achieve growth in each of the sectors. It went on an acquisition spree using a strategy which it called 'String of Pearls'. It acquired many companies that fit in strategically with it in almost all of its business segments but more in its IT division. The consumer care division also saw a few acquisitions, the largest of which was Unza Holdings Berhad (Unza), a Singapore headquartered company, which was acquired in 2007 for about US$246 million (Rs 10.10 billion). Unza was an investment holding company in Malaysia, which engaged in manufacturing, packaging, trading, and marketing a range of personal care and household cleaning products. The company was one of the largest in south-east Asia producing 48 brands ranging across hair-care, skin-care, body-care, fragrances, laundry detergents, and household cleaning segments. The company had a presence in over 58,0005 retail outlets across 36 countries including Malaysia, Singapore, Brunei, the Middle-East, Vietnam, Hong Kong, and China.
What made this Wipro-Unza acquisition special was that it happened at a time when WCCL was only a Rs. 6 billion company and Unza was valued at more than Rs. 7.5 billion. WCCL took the risk of acquiring a company much bigger than itself. While industry analysts knew that WCCL's basket of products and its global reach was extended, they also felt that managing it would prove a daunting task for an Indian player inexperienced in international markets. They felt that WCCL would not be able to handle such a huge distribution network and product portfolio as Unza's and that there would be problems in integrating the two groups. Despite the skepticism and pitfalls, WCCL did succeed in overcoming the problems associated with Unza's acquisition and later went ahead for more global acquisitions like Yardley and LD Waxson. However, after these acquisitions, speculation was rife among the media and investors that the company was planning to hive off its consumer care business. ..
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