India on Course for Record M&A
Valuations of Indian companies are extremely high and reminiscent of the dot-com bubble but India is on course for another record year of deal-making, says Joel Perlman, president and co-founder of Copal Partners. His company has 1,050 people, or more than 80% of its employees, in Gurgaon, a suburb of Delhi, and does research and analytical work outsourced by banks, investment funds and asset managers in India and across the world. Several global banks, including Deutsche Bank and Citigroup, are minority investors in the company.
Deals India: In the deal world, we hear from companies that valuations are inflated in India. Does your research support this view?
Mr. Perlman: Yes. Expectations in India have gone through the roof. We acquired Exevo, a Delhi-based company in 2008, and are looking for more acquisitions. I am shocked by the numbers I see. Sometimes a valuation of a company comes at 15 times or more of their earnings before income tax, depreciation and amortization. People are extremely optimistic and expect high valuations; it reminds me a little bit of the dot-com boom. As a company, we’ve said we will take a back seat at this time, and aren’t looking to acquire.
Deals India: How did Copal Partners evolve? What prompted you to start a company that would handle research for bankers?
Mr. Perlman: I worked at the McKinsey Knowledge Center in Gurgaon, and always thought it was a powerful tool. Rishi Khosla, the other founder of this venture, and I were together at the London School of Economics. He went on to invest private-equity funds on behalf of Lakshmi Mittal, and brought an investor point of view to the company. We thought there would be demand especially for funds and foreign banks setting up offices in India.
Deals India: Were banks responsive to the idea?
Mr. Perlman: It was very difficult at the beginning. I moved to India in 2002 and set up our Copal knowledge center. It was a challenge from Day 1. That I was not Indian didn’t help matters. But we got our first big contract from a large investment bank in Europe after a few months, and that helped us scale the business up. We found the talent level to be high in India, and people were committed to jobs.
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