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Ever since the Tata Steel board took the call to sell its haemorrhaging UK assets last month,
old Tata Steel hands in Jamshedpur have been heaving a sigh of relief. When the deal was
done in 2007, there were many insiders who felt their role would be substantially
diminished. After all, the Tatas were buying an entity that was nearly four times the size of
Tata Steel. As it turned out, the $12.1 billion Corus acquisition-the biggest global acquisition
made by an Indian company-ended up as a millstone around Tata Steel's neck. And it
remains a case study of how not to craft a global merger and acquisition (M&A) strategy.

 Timing is everything: In the early 2000s, the strategy team at Tata Steel had
identified a number of potential M&A deals from the US, Europe and Asia. Corus was
then a penny stock and available for 10 per cent of the value that Tata Steel
eventually paid for it. Apparently, this was the transition period between J J Irani's
reign and before B Muthuraman took over. And there was no consensus on the
globalisation strategy. L N Mittal's acquisition of Arcelor in 2006 may have galvanised
the Tatas. But by then, the commodity cycle was at its peak. And asset prices had
zoomed.

 Know when to withdraw: Tata Steel had signed a negotiated deal with the Corus
management. A few months later, Brazilian steel maker CSN made an entry with a
higher offer. And the Corus board proposed an auction. Now, participating in an
auction is akin to a frog in a boiling water. Since the price moves up only marginally,
the impact is often hard to gauge, and before you know it, you could end up getting
scalded. In any case, insiders suggest that by then, it had become a prestige issue.
It eventually paid 30 per cent more than the original negotiated price.

 Show me the cash: In hindsight, doing an all-cash deal funded by debt may have
been a big mistake. For one, a part stock deal may have softened the blow a fair bit.
And by allowing the incumbent management team to sell out their stock options-the
then CEO Philippe Varin made £10 million as part of that deal-eliminated their
residual interest in the business.
  Due diligence is key: It is true that the Tatas may have gone in with their eyes open
that the underperforming UK assets could prove to be problematic. But it isn't clear if
they knew the full extent of the situation-or indeed, how to fix it. As a former Tata
Steel strategist avers, the UK assets had seldom generated a surplus over a decade.
Their underperformance was masked by its well-run Dutch operations at Hoogovens.

 Kid gloves won't work: After taking over, the Tatas chose a hands-off strategy. And
left it to the incumbent group CEO, Mr Varin, and his team to independently run
operations for the first two years. McKinsey & Co christened this as a new Asian
style of integration. No 100 day plans. No integration teams swooping down on their
conquests. The Tatas earned tonnes of goodwill, as humane folks who thought long-
term and weren't cost-cutters. Except that the price of that approach showed up a
decade later, when losses in UK exceeded a million pounds a day. No wonder that
the Tatas had to sell part of its assets earlier this week at a nominal value of £1, with
all the debt still on its books.

 Cut your losses quickly: That the UK assets were spiralling out of control and
needed decisive action was all too evident by 2012. Yet the Tatas chose to soft-
pedal, restraining its leaders from taking too hard decisions and actually confronting
the unions. The rationale: Tatas had many other business interests in the UK-and
any wrong move would have an impact on its other businesses. It partially
mothballed assets in Teeside, sold off a bit to a Thai buyer, SSI UK, but there was no
solution to the endemic structural uncompetitiveness of UK steel. The only option
was to shrink the operations, and hold its operating team responsible for driving
profitability. Instead, insiders say it gave a long rope to a former ThyssenKrupp
discard Karl Kohler, who as CEO, promised the board that a turnaround was
imminent. Finally, in February this year, the board gave Mr Kohler the marching
orders.

During this same period, the mantle of leading the Tata group moved from Ratan Tata to
Cyrus Mistry. And perhaps, the decision not to put the assets on the block sooner may have
had something to do with that transition. After all, the Corus acquisition was one of the
biggest legacies of the Ratan Tata era.