Dealmakers: Haigreve Khaitan and Ganesh Prasad

Bar & Bench recognizes Khaitan & Co’s Haigreve Khaitan and Ganesh Prasad as Dealmakers for their role in the Baring Private Equity Asia’s acquisition of a controlling stake in information technology and business process outsourcing service provider Hexaware Technologies Ltd..The deal was the largest private equity buyout transaction in the IT sector in India. The transaction was complex with multiple legal and commercial issues. Both Haigreve and Ganesh not only provided legal advice to their client in structuring the deal but also helped the transacting parties close this deal..Dealmakers: An Introduction.Haigreve Khaitan heads Khaitan & Co’s Mumbai office and the firm’s M&A practice. In 2001, he moved to Mumbai from Kolkata to set up the firm’s Mumbai office, a move he initially thought would be a temporary one..Haigreve started his career in litigation, before moving on to M&A and private equity, and project finance In the last few years, he has been involved in some of the most high profile and complex deals including iGate-Patni, Hospira-Orchid, Sterlite Industries-Asarco LLC among others..Ganesh Prasad, who joined Khaitan & Co as a Partner in 2011 from Amarchand Mangaldas has over 12 years of experience and specializes in domestic and foreign venture capital and private equity investments in a variety of sectors, including financial services, insurance, education, human resource consultancy, real estate development, IT and IT services..The Client.Baring Private Equity Asia is one of the largest private equity firms in Asia, managing over $5 billion through a pan-Asian investment program specializing in mid-market companies. Baring has been investing in Asia since 1997 and has more offices in Hong Kong, Shanghai, Beijing, Mumbai, Singapore, Jakarta and Tokyo..“Working with the Baring team was a refreshing experience given their commercial and legal acumen and their in-depth involvement”, says Ganesh..The Deal .The deal involves a purchase of shares aggregating to approximately 42% of Hexaware by Baring Asia from the promoters of Hexaware and General Atlantic followed by a mandatory open offer by Baring Asia of an additional 26% of Hexaware to the public shareholders of Hexaware. Baring was the successful bidder to buy out the stakes of the promoters and General Atlantic..Counsels on the Deal.The deal involved a host of lawyers from four law firms including international law firm, Allen & Overy..Khaitan & Co acted as legal counsel to Baring Asia and worked along with a team from Allen & Overy led by Partner Gautam Narasimhan. Narasimhan was recently promoted as Partner in the firm’s Singapore office..AZB & Partners advised the sellers (promoter group led by Atul Nishar and private equity firm, General Atlantic), with a team led by Mumbai-based Partners Abhijit Joshi and Essaji Vahanvati. J. Sagar Associates too advised the promoter group with a team led by Partners Somasekhar Sundaresan and Manisha Kumar..High point of the deal.Haigreve and Ganesh: The deal is one of the largest buyouts in the Indian information technology space. It was a high pressure and extremely demanding transaction given that the whole process from starting of diligence to making the open offer got completed within a period of 3-4 weeks..Challenges during the transaction.Haigreve and Ganesh: Given that there was a bid involved in the transaction, different processes of the transaction were required to be run in parallel and had to be completed within a short span of time. There were unique structuring aspects to the transaction, including with respect to acquiring control of Hexaware independent of the share acquisitions from the promoters and General Atlantic..Unique feature of the deal.Haigreve and Ganesh: The deal is one of the largest buyouts in the Indian information technology space, topping Apax Partners’ $ 330 million funding to iGate Corp for the acquisition of Patni Computer’s in 2011, which, coincidently, was also handled by our firm..Emerging trends in the PE space.Haigreve and Ganesh: Lately, there is a visible focus on control transactions by PE firms. There is greater focus on increasing shareholder value by professional management teams..What is the kind of activity that you see in the PE investment market in India? Which are the sectors where you are seeing more demand for PE funds?.Haigreve and Ganesh: Generally, we have been noticing an overlap between venture capital and private equity investment. Both VC and PE players are interested in smaller deals involving lower valuations. We have also noticed that PE players are coming together to form a consortium for making investments in Indian companies. In our experience, IT/ITES and e-commerce have been the most active sectors in terms of PE activity. In addition, the healthcare sector is also witnessing a fair deal of PE activity..Impact on PE transactions, with specific reference to the current regulatory uncertainty, gaps in valuation, and depreciating rupee. .Haigreve and Ganesh: Regulatory uncertainty has always been an issue foreign investors have faced while investing in India. We are closely watching the so-called big-ticket reforms rolled out by the government and their impact on investor sentiment..The valuation gap has always existed in PE deals. There were predictions that the valuation gap will increase in 2013, and in our experience, we have seen a few deals wherein the deals have failed on account of a valuation gap. A slide in the Rupee impacts the internal rate of return and in turn affects the exit of PE investors. If the Rupee continues to depreciate in the manner that we saw last month, PE players will be very cautious while exiting from their portfolios.