One of the most prominent sectors in the mergers and acquisitions (M&A) landscape in recent times may be falling off the deal-makers' map now. The auto component industry, which was ranked third in the list of sectors with most M&A activity in 2007, is now going slow as a result of the liquidity crunch and fears of a recession, which make financial engineering and forecasts a tricky issue.
"We are going slow on mergers and acquisitions now," said NK Minda,Managing Director, Minda Industries Ltd. "We had earmarked Rs 300 to 400 crore for an acquisition this year but have deferred it for the time being."
Minda which is a prominent auto component company and manufactures horns, switches, lights and batteries for cars and two wheelers, already has numerous joint ventures with foreign companies for developing various components.
"The worst is still to come and there is likely to be a shake up in the domestic component industry as well," Minda said. "Valuations of companies abroad are at all time lows and there are many attractive companies to be bought but due to the prevailing uncertainity in the market we are lying low."
Global industry major SKF which also produces industrial components also exuded similar sentiments. "We are a cash rich company and always on the look out for possible acquisitions but we are going cautious on this front now as demand is slackening and the situation is fluid," said Tom Johnstone, President and CEO, SKF. The company has deferred its plant at Haridwar for the next six months due to the recession. The Swedish company has over 20 acquisitions to its name globally.
"Component industry is largely family owned so a consolidation will be the last option. But it is true that overseas acqusitions have slowed down simply because there is no money in the market now," said Vishnu Mathur, Executive Director, Automotive Component Manufacturers Association.