Firms may follow ArcelorMittal-Uttam Galva route

Steel giant ArcelorMittal's move to partner domestic firm Uttam Galva may soon become the trend setter for the domestic industry as firms look at mergers and acquisitions as an attractive option to beat slowdown blues, says global advisory services provider Ernst & Young. Post slowdown, metal and mining firms are looking at M&As as a strategy to stay afloat and strengthen their businesses, Ernst & Young said. "The slowdown has created an opportunity for bigger firms to acquire mining assets of the other entities. Also, smaller ones are looking at the M&A opportunity to partner financially sound companies and come out of the gloom," Ernst & Young Risk Advisory Leader, Metals and Mining, Anjani K Agarwal told. Besides, there is always an opportunity through M&A route for global companies "to test local markets," he said. "...Many majors (firms) with strong balance sheets or access to capital markets are taking advantage of lower price environment and fall in asset values to expand, integrate and de-risk their business models," Aggarwal added. Moreover, assessing access to capital and cost reduction as top two risks being faced by the domestic companies in the sector, Agarwal said, "there is an urgent need for the firms to address them to achieve their long-term goals. "Companies are required to address these risks at the earliest and consider reducing operation costs including high grading, re-evaluating the capex program and active cash management...," he added.