Is there value in L&T takeover?

Mumbai: Mindtree is expected to face collateral damage to its business, jousting between the company’s promoters and a rival who has bought significant stake in the company from a shareholder. Buying a software services company in a hostile bid is fraught with its own risks for the marauder, though these risks will be manifested after some time.

A software-as-service business model, which is what most Indian technology companies have, derives its value from the quality of service offered and the nature of clientele, while a product company has patents and proprietary technology, which make it relatively difficult to be replaced.

Service industries do not usually see hostile takeovers because delivery could be hit if there is unease in the ranks. That apart, customers tend to close the hatch in preparation for a disruption of service. Most of Mindtree’s deals come from discretionary spending, implying that these businesses come up for renegotiation sooner.

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