A week before the government-appointed board of Satyam Computer Services opens the financial bids for a 31% stake in the company, IT consultancy Forrester Research said the lack of financial data and unknown legal liabilities of Satyam could see the deal falling through. The firm has advised Satyam’s clients to keep their alternative plan ready.

In a report released on Monday, Forrester said there ‘is a risk that the deal falls apart and Satyam goes back to square one. The bidders won’t have access to the company’s full financial data, and the deal is happening under the shadow of the risk of class action suits and litigation in the US as well as a series of financial and legal challenges in India.’

The report said most bidders Forrester spoke to were concerned about the unmitigated risk and the unavailability of any indemnification for the successful bidder. ‘Based on conversations with prospective bidders, we believe that some of the key bidders will exit discussions quickly,’ it said.

Also, for clients of Satyam, the sale of a majority stake may not ring the end of insecurity. According to the report, titled ‘Satyam Uncertainty-Phase 2’, ‘to protect their own interests and ensure continuity of service, clients need to accelerate finalisation of their Plan B and keep a close watch on which firm buys Satyam to decide if and when to pull the trigger to shift to that Plan B.’

Citing Larsen & Toubro and IBM as front-runners in the race for acquiring Satyam among the eight bidders that are in the fray (according to its research), the report has raised some key questions like bidders’ ability to arrange for funds, which is between $600 million and $800million, to buy 51% equity. It said that L&T will have an advantage in service overlap and IT experience, its corporate reputation, ability to manage mergers & acquisitions, along with its relationships in government agencies, will make it the most likely winner. According to Forrester’s analysis, foreign firms will score high on clients’ corporate governance questions as ‘most of these firms are headquartered in the United States’, it said.

... contd.