Dilawar Hussain

KARACHI, April 12: Mergers and Acquisitions (M&A) activity in Pakistan is concentrated mainly among the Multinational companies and that too in the pharmaceutical sector, though sick industrial units could be a key area where the benefits would be significant. This was stated by speakers at a seminar on Mergers and acquisitions in Pakistan organized by the
Corporate Finance Society 97, MBA-IV the graduating class of May 97 of the IBA, on Saturday.
   
Dr Abdul Wahab, the director of IBA, said that there were several aspects to the M&A activity in Pakistan such as the small size of local companies and the problems of management of huge corporations.
   
Elaborating, he said that due to their small size, Pakistani companies were unable to compete globally, while we lack the management capabilities to take care of large corporations. He drew the attention to the PIA and Pakistan Steel where it was, he said, difficult to manage 25,000 employees.
  
Other aspects to the M&A activity, he said, were that it killed entrepreneurship of employees and enhanced the political and economic power of the conglomerates. M&A activity has its benefits as well as problems,  said Dr Wahab and added that the benefit would depend on the motives behind the activity. If it is antisocial or to obtain monopolistic power, it would
be damaging.

Mr. Kamran Faridi, MD Citicorp Investment Bank Ltd. said that the concept behind M&A is to enhance shareholders value, create liquidity and raise demand, adding that we need large, liquid, efficient M&A market. He emphasised on the safety nets for workers and employees who are laid off due to M&A.

Mr. Shabbir Diwan, Executive Director, Gatron Industries opined that the mergers of local companies so far had all been paper mergers. He cited the mergers of Raza Textile with Omer Fabrics and Allied Spinning with Taj Mills of the same group. He advocated the acquisition of sick units, whose  carryover losses could be adjusted by profitable companies against their earnings.
   
Mr. Moazzam Malik, Director, BMA Capital Management said that there was no formal role of M&As prior to 1990 but as market grows, the activity would receive tremendous boost.