Published on November 22, 2024
During its TBEM Assessment, Tata Power identified the need for a more structured screening process to streamline transaction sourcing and evaluation of new opportunities. The goal was to create an M&A evaluation framework based on learnings from other group companies that aligned with strategic priorities and threshold return expectations.
Focus areas
- Set up a proactive approach to evaluate the M&A opportunity as per the growth profile of the company including obtaining management buy-in.
- Determine a pre-defined selection criteria and outline guardrails for initial screening and shortlisting criteria for potential opportunities.
- Create a detailed evaluation based on financial and operational parameters for further assessment of the opportunity, post qualification of initial screening.
To support the Strategic Finance and M&A team at Tata Power in its improvement endeavours, Tata Business Excellence Group (TBExG), facilitated Best Practices sharing sessions on the subject. Key insights were provided by Nanda Kundu, DGM - Chairman Office, Corporate Strategy and Projects, Tata AutoComp Systems; Neha Agarwal, VP - M&A, Tata Consumer Products; and Abhijit Midha, SVP - Strategy and M&A, Tata Consumer Products.
Outcomes
Tata Power has now instituted a robust evaluation framework to facilitate decision making and value creation. The company’s M&A process has been upgraded and there is a noticeable shift in its approach to strategic decision making, strategic fitment, synergies and margin for business for growth and sustenance, as against the former methodology of project-wise analysis.
Learnings incorporated in the updated M&A process:
- The growth strategy of the organisation shall lay out the approach for inorganic growth.
- The process of evaluation of M&A opportunities can be a two-step process.
- The first level screening shall be based on the growth strategy of the company which shall lay out focus areas of business, capabilities to be built and potential synergies, in discussion with business verticals. As an outcome, a pre-defined selection criteria and guardrails for initial screening and shortlisting of potential opportunities can be identified.
- The second level of screening shall involve detailed evaluation based on financial and operational parameters for further assessment of the opportunity, post qualification of initial screening.
Impact
The exercise has helped Tata Power in reducing its turnaround time of total evaluation for step 1 and step 2, from 4-5 weeks down to 2-3 weeks. This has expedited the company’s decision-making process, with increased focus towards growth ambitions and strategy formulation for the coming years.
Participant Speak
The engagement has helped the team in progressing towards the KPI of developing an efficient and effective M&A process. The process of evaluating opportunities witnessed a shift to a well-defined strategically aligned M&A process as against former methodology of ad hoc project-wise evaluation. This approach will drive a more focused strategy, reducing turnaround time and accelerating decision-making. It will also optimise resource utilisation, enabling the company to better align with, and achieve its growth objectives.
— Anjali Kumari, Group Head - Strategic Finance and M&A, Tata Power