Larsen & Toubro Infotech’s Hostile Bid for Mindtree Ltd.: Much Ado About Nothing! A Teaching Case

Abstract

This article tries to understand and analyse the recent acquisition of Mindtree Ltd. by the corporate conglomerate giant Larsen & Toubro (L&T). L&T Infotech (LTI), which looks after the information technology (IT) business of the L&T group made a hostile bid for Mindtree Ltd., one of India’s leading and fastest growing infotech companies in March 2019. The case goes on to analyse the deal and delves into the reasons for the deal turning hostile. The objective of the case study is to understand the concept of hostile takeovers and the business environment that augur acquisitions. The second part of the article tries to focus on anti-takeover tactics, which the company adopts to avoid the takeover attempt. Here, Mindtree’s decision of share buyback, immediately after L&T’s bid, has been examined. Two perspectives have been studied here—one from the point of view of the promoters of Mindtree, and the other from the point of view of investors. There have been certain very interesting and jocular exchanges of words between the promoters of Mindtree and LTI1 during the whole phase of takeover, which put the focus on the human element in acquisitions. The business environment and industry analysis have been conducted to understand the nature and circumstances of the deal. Legalities of the acquisition and dominant player misuse have also been examined. LTI’s take on the acquisition was very clear. For them, it was a pure business deal. They were on the path for fast growth, which Mindtree would help them achieve. Certain sectors such as Retail, Consumer Packaged goods, Media and Technology are underachieved for LTI where Mindtree has a formidable presence. Mindtree would help LTI explore geographies in Europe that so far were unexplored. However, for the promoters of Mindtree, this bid for takeover became an emotional issue. It all started when one of the non-executive directors of Mindtree itself—V. G. Siddharth—came up to LTI and offered his shareholding of 21 per cent in Mindtree. LTI grabbed this offer and went on to announce that it would acquire a total of about 60 per cent in the company, which made the other promoters very uncomfortable. There was a lot of resistance from some of the Mindtree promoters, and certain hasty announcements and statements in the media were also made. This interesting interlude between the two companies brought a lot of attention to the acquisition and left the investors in a state of confusion. The main objective of the case will be to analyse and teach the different corporate actions which took place and the strategic decisions that were taken during the entire interaction between the two companies. This case would address teaching objectives for the topics such as hostile takeovers; share buybacks as a new approach to anti-takeover defence; political, legal and industrial analysis relevant to corporate restructuring decisions; and Hubris and Managerialism. A separate teaching perspective on Corporate Business Communication has also been explored.