Alongside a currency plunge and softening economic growth, cross-border M&A was a source of ignominy for India in 2013. Apollo Tyres attempted to buy the larger, US-based Cooper Tire & Rubber for $2.5bn in cash. Apollo’s shareholders immediately panned the deal, given the debt required. To the relief of those shareholders, labour difficulties at Cooper will probably prohibit it anyway.
Yet the reputational damage to Indian acquirers will linger and will sting even more when set against another notable M&A milestone – China’s completion of its largest US buyout.
Apollo saw the Cooper acquisition as the quickest route to becoming a global tire player. The combined company would have been the seventh largest tire manufacturer in the world by sales. But the deal required a pile of debt in a highly cyclical business. US merger agreements are typically airtight but unions baulked at the deal, which provided a window for Apollo to ask for a lower price or simply walk away. For Apollo it is an escape. But the outcome casts doubt on the credibility of Indian buyers. The labour hang-up should have been anticipated and resolved during the due diligence phase.