What should Tech Mahindra do next?
Tech Mahindra (TM) paid around $351 million for a 30% stake in Satyam yesterday and has proposed buying an additional 20%. With the latter purchase, Tech Mahindra would control the outsourcer. While this certainly puts another bookmark in the history of the firm, the story is far from over. In the upoming months/years, Satyam will continue to remain newsworthy as:
- some Satyam clients will continue to exit the company even though Tech Mahindra money is now behind the firm. Client losses will continue until TM can convince existing and prospective clients that the company is now sound. This will be a time-consuming and expensive PR, marketing and sales challenge for the TM and Satyam teams. It will also take some solid accounting statements to restore buyer confidence in the old Satyam numbers, operations, people, etc.
- criminal trials involving former Satyam executives will keep the press focused on a bad era in the history of the company
- investigations into the actions of others (e.g., the local PriceWaterhouse auditors) will also be a media focus and a distraction for the company
- the revised audits and financial statements will doubtlessly shed a new light on the revenues and potential profits of the old Satyam. If it turns out that the company was not profitable or only marginally so, it will make the quality of the business that TM inherits appear suspect. That won't be good for TM.
- spurned suitors for Satyam will ratchet up their efforts to woo away customers from Satyam. Business and competition don't take a rest just because TM needs time to integrate the firm into its own.
If I were running TM, I would:
- do all the due diligence I could on the old Satyam as fast as possible. If you find more skeletons, then try to scuttle this deal. If not, be prepared to buy the whole enchilada as fast as possible and get on with the integration.
- drop the Satyam name/brand like a hot potato. This brand is damaged - possibly beyond repair. It's a brand that got tainted around the same time as Bernie Madoff's scam became apparent. Drop Satyam and use the TM name. Build a new brand, reputation, culture, value set, etc. from TM.
- start re-assuring each and every Satyam customer. They need to feel the love again and they need to hear it from a TM executive (not and old Satyam executive).
- re-energize the Satyam workforce - goodness knows they need it.
(see also Larry Dignan's post)