Overcomming Challenges for Global Growth post Corus Acquisition by Tata

Steel
The acquisition of Corus by Tata Steel was much hyped and one of the most
expensive overseas acquisition by an Indian company. The primary objective for
acquiring Corus by Tata Steel is that its low cost plants in India would use Corus
finishing plants to supply and expand the latters high end customer franchises in
Europe. Unfortunately even after eight years after acquisition, Corus is still not out
of woods, inspite of the fact that Europe is out of recession.
Its Europe operation EBITDA has increased year on year but fallen sequentially. Also
its net loss has come down from the year ago quarter but increased over previous
quarter, inspite of the fact that there is sharp increase in production and turnover
both year on year and sequentially. This complete paradox will be highlighted in the
case and analyzed to understand as to what has gone wrong and what needs to be
done in order to create a synergy for global growth of Corus operation with the
parent Tata Steel Company.
An analysis of European steel market will be studied and how it has impacted the
pricing power for the company. Also for Indian company how to handle such market
in face of competition at global level to gain greater share will be a case to study.
Inspite of falling raw material prices the company bottom line hasn't impacted
positively.
Overall the structural defects in the Corus operation, the competition it faces in the
global market and the capital investment which is necessiated for the plant to
operate with better operating ratio is also a good area of investigation in the
hindsight post acquisition.
To conclude, Tata Steel- Corus operation is only at the beginning of what promises to
be a meteoric rise. However, as the company continues its struggle for an
impressive run, the pressing question is not how quickly Tata Steel- Corus operation
can continue to grow but instead how well it can manage its growth so that it
doesn't burn out!!
Learning/ Teaching objective
The learning/teaching objective of the case will be an analysis whether an
acquisition of such an expensive nature is really worth for growth and expansion of
company. The case will enrich the students to understand the finer points of
mergers and acquisitions and what due diligence process needs to be adopted visaviz the market conditions in which they are operating. Also it will help the student to
understand how synergies are created or rather what needs to be done after an

acquisition to create a synergy between an acquired entity and the parent company.
On the whole it will be a good learning to understand that not all acquisitions are
viable and even if the company takes a hit on its balance sheet post acquisition,
what strategy should be in place in order to revive the operations- so as to put the
company on the pedestal of growth.