Troubled companies are usually much better motivated to succeed after a takeover than successful ones, IRP has learned

Expanding internationally is not always a guarantee of success, but learning and applying the lessons from both successes and failures is the key to making future ventures successful.

Indorama Ventures Ltd (IVL) and subsidiary Indorama Polymers Plc (IRP) have both been on the learning curve for several years.

IVL\\\\\\\'s first venture abroad was the acquisition of a thriving wool company in Ireland in 1998 for $50 million in cash, but five years later it shut the venture.

"There were various lessons that we learned from the Irish operations," says Aloke Lohia, who spearheaded the acquisition that made the group one of the world\\\\\\\'s largest wool makers.

Looking back on the experience, Mr Lohia says that the Irish operations were not cost- competitive in the textile industry, where cost is critical.

In contrast, another $50-million acquisition in 1998, a polyester business in Thailand, has thrived.

"The European wool business, which continued to be run by the previous owners, tanked. I\\\\\\\'m not trying to lay the blame on others [for the failure] as the decision was mine and only mine, but there were many things learned from the failure," he recalled.

"Most notable is that our home-grown, hungry-for-success managers performed far better then their new counterparts. This lesson has helped me put trust in our team and to heed to their advice. People matter."

Mr Lohia says he has found that when ailing companies are taken over, management and staff have a strong desire to make the necessary improvements. When already successful companies are acquired, existing management and staff tend to be complacent and do not make the effort
to improve their operations in line with the new ownership\\\\\\\'s goals.

"What I found was that hunger and the need to prove something were most important in delivery of performance, and people working in the underperforming plants that we acquired went all-out to prove themselves, given the chance, and prove it they did," he said.
"The wool team in Europe were overconfident of their past accomplishments and may have became complacent."

Because cost competitiveness is the key to success in Indorama\\\\\\\'s industry, the low-cost culture makes businesses outperform in all conditions, adverse or favourable. The overriding focus on protecting margins influences management to make calculated decisions, whether for acquisitions or related to the market.

"Therefore, while we may rarely witness a bumper harvest, it is also highly unlikely that a drought will wipe us out."

But the Ireland experience would come back to haunt IVL and IRP, because when IRP (then called Indo PET) was looking to acquire StarPet in the United States, banks were unwilling to finance the venture.

"Siam City Bank was the only bank that had shown interest in our project and it too asked we were looking to go abroad after having witnessed a failure in Ireland. Should we not focus on Thailand alone?"

But finally the banks (SCIB and Bangkok Bank) decided to finance the deal.

Mr Lohia says he sought financing for the US acquisition in Thailand because no US financial institutions were willing to offer any help as his company had no track record there.

But even with financing in hand, the company found that StarPet\\\\\\\'s customers were reluctant to get on board with the new owners.

"If you look at the US market it is not as fragmented as that of Thailand, with a handful of players supplying the FMCG (fast-moving consumer goods) companies. With only 50,000 tonnes per year (at that point), we were not strategic enough," he says.

Eventually some customers did sign up and the group continues to value them highly to this day.

One thing Mr Lohia has learned is the value of tight control of the operations. So even if the management in the old companies have a full say in their operations, the key policy decisions today are made in Thailand.