Family values
November 2008

The acquisitions adventure that Tata Chemicals embarked upon has been a story of sharing and caring, understanding and being understood

The Tata Chemicals of the present is a bit like the great Indian joint family, with different branches safeguarding a singular idea, the unity of the many furthering a common cause, and a decisive centre keeping its members going in the desired direction. Like with the joint family, the advantages of coming together are clear and manifold. Unlike it, the fault lines and potential pitfalls are few.

The aquisitions agenda that has seen Tata Chemicals add sinew and muscle, growth and geographical spread is remarkable in more ways than one. It has enabled the company to extend its footprint to Europe, the Americas and Africa, made it the world’s second-largest producer of soda ash, and given it a legitimate shot at becoming a global leader in its business.

Tata Chemicals’ first significant stride down the inorganic growth road happened in 2004, when it merged with Hind Lever Chemicals. In 2005, it bought a 33-per cent equity stake in Indo Maroc Phosphore (IMACID), Morocco, which delivered access to the North Africa and Middle East regions for the company’s fertilisers.

The same year, Tata Chemicals acquired the British giant Brunner Mond, and with it the resource-rich Magadi Soda Company in Kenya. That was trumped by an even bigger buy: the acquisition earlier this year of General Chemical Industrial Products (GCIP), a significant force in North and South America.

Different people, different cultures, different work practices — Tata Chemicals has needed a deft hand and plenty of understanding to make the acquisitions succeed. The signing and the sealing of the deals may be over, but the integration issues they have brought to the door can not be smoothed over or resolved in a hurry. It demands patience and people skills just as much as it requires lucid and hard-boiled business perspective.

“The critical factor in integrations is to remember to think for more than one company or one organisation,” says Homi Khusrokhan, managing director of Tata Chemicals. “You have to learn to think for two, for three, for four different entities. You have to retain the best people, grow the customer base, make the best practices of each company migrate to other parts of the wider organisation, and foster the bonding factor, where people feel they are part of a greater whole, in this case the Tata family.”

The Tata family was not unfamiliar to James Mathenge, chief executive of Magadi Soda. Back in 2002, three years before his company was acquired, Mr Mathenge had been approached by Tata Chemicals to become Magadi Soda’s agent in India. “I said no because we had already established our brand in India; we were competitors then,” he says. “Given this background, we were comfortable when we heard of Tata Chemicals’ interest in buying Brunner Mond. In fact, it was pretty welcome news.”

Brunner Mond was owned by a consortium of venture capitalists at that point and the fear among the company’s people — and, by extension, everybody at Magadi — was that it would get passed on to another bunch of venture capitalists. “Tata Chemicals was a chemicals company and its goal was to expand the business, which was just right by us,” says Mr Mathenge. There were apprehensions, though.

A lot of Indian enterprises in Kenya do not have a good reputation, especially in their handling of people. “But the Tata group has been exceptional, and I can now understand why,” says Mr Mathenge. “It is sensitive about other cultures and how they deal with them, about issues such as interference. This has been so unlike what I have seen in many other acquisitions. We are a Tata company now and I sure would like to absorb and be even more a part of the group’s ethos.”

For GCIP chief DeLyle Bloomquist, expectations from the buyout by Tata Chemicals were driven by the company’s own shoot-first-ask-questions-later experience. “We had acquired a company called Zemex Minerals in 2007,” he recalls. “We rushed in, took over the management, terminated the corporate employees and closed down some of their offices. All inside 60 days. That’s what American businesses do and that’s what we thought Tata Chemicals would do. My managers and I were thinking about getting our resumes updated.”

That, in the un-American script that played out, was not necessary, and Mr Bloomquist and his managers remain in the positions they held. “We were told that one of the reasons Tata Chemicals acquired GCIP was the management team and that it had every intention of retaining us. They said that was the Tata strategy: to have the best management teams in the countries they are doing business in; they didn’t want to Indianise these companies.”

In the days immediately after the acquisition was completed, Mr Khusrokhan and R Mukundan, executive vice president of the chemicals business, met all of GCIP’s people, in New Jersey and in Wyoming, speaking about the Tata family, its interest in the community and the welfare of its employees. “That was fine but there was a healthy amount of scepticism,” says Mr Bloomquist. “We wanted them to walk the talk and that’s what has happened. Our people now know that the Tatas are true to their word. The focus is back on our jobs, on the company.”

The dissimilarities between the Indian and American approach were reflected in other aspects too. “At GCIP speed of execution is a given,” says Mr Bloomquist. “We don’t care how many dishes we break; we do our thing and clean up the damage later. But with Tata Chemicals the style has been much more measured and much more thoughtful. They want to be as smart as possible. Timetables and timelines are not as high a priority as work systems and ethics. There certainly were times when we were, kind of, biting on the bit and Tata Chemicals was trying to pull back, saying, ‘Hold on, we want to make sure this is done in a responsible manner’.”

In Britain, too, with Brunner Mond and its chief executive, John Kerrigan, the Tata Chemicals way has taken some getting used to. “The structures are more cluttered than we are used to,” he says. People at lower levels are not as empowered as their counterparts in the UK and “we can always get things done if we go to the ‘top’ but business should not need to work that way.”

Mr Khusrokhan readily acknowledges the problems. “There are a number of cultural differences between the Indian, British, Kenyan and American teams. The Americans expect very rapid decision-making and minimal bureaucracy. For the British team adherence to timelines is extremely important. Let’s face it, as Indians rigid timelines have never been one of our strengths. We seem to thrive on rapid changes and are comfortable living with some degree of chaos in our lives. It is essential for Tata Chemicals, or for that matter, any international group to be aware of its own shortcomings and to be conscious of the expectations of others.”

These are mere quibbles when you consider the progress made on the greater goal of creating a single cohesive entity with a shared vision and values. “There is a whole lot of enthusiasm for the new ownership right through the organisation,” says Mr Kerrigan. “We can see the visible signs of development investment and the benefits of having Tata Chemicals on our side.”

The sharing part has translated into concrete measures: unrolling the Tata Business Excellence Model in the acquired companies — Brunner Mond and Magadi Soda have already embarked upon the exercise — having managerial teams exchange visits, and learning from one another in areas such as the environment and climate change.

“Success in integrations is finally assessed in terms of the shareholder value created, the synergies that flow from the coming together of the companies and, finally, how unified the organisation feels,” says Mr Khusrokhan. “We have created a larger, stronger and better organisation by coordinating our business efforts and managing people in such a way that, I daresay, all of us feel we have gained as a consequence of Tata Chemicals becoming what it has today.”