Stellar Information Systems Ltd

Small acquisition done well

Location: Utrecht
Activities: Acquired data recovery centre
Industry: Information technology

A data recovery solutions company based in India, Stellar made a strategic acquisition in the Netherlands in early 2009. By acquiring RSE Data Recovery BV in Utrecht, Stellar catapulted itself into continental Europe from its largely Asia and North American presence.

Stellar representatives met several data recovery organisations while exhibiting in Europe. Coincidentally, at the same time as when Stellar was seeking a foothold to enter the continent, the owner of RSE was trying to move outside of Europe and was looking to sell. Stellar decided to go ahead with the acquisition and signed a memorandum of understanding (MoU). However, there were several unanswered questions about the acquisition process and about how things would pan out post-acquisition, especially from a legal and taxation viewpoint.

To find some answers, Stellar approached the NFIA soon after signing an MoU with the Utrecht-based company. “At that time, we met with Robert Schipper, but we had no idea of what to ask of the NFIA or even what its expertise was or whether it had any at all,” recalls Manoj Dhingra, Director-Services in Stellar.

The meeting yielded several benefits though, and over a short period of time, Stellar was able to gain an insight into the Dutch legal and taxation system as well as labour and employment laws. “Mr Schipper’s considerable knowledge built our confidence immensely. After all, we were looking to operate in a new environment post-acquisition and anything that reduced uncertainty was welcome,” says Manoj.

The biggest roadblock Stellar faced, however, was in carrying out the legal due diligence of the company they were about to acquire. The small size of the acquisition did not justify hiring a large international law firm, which is common practice. “We believed that the quality that a law firm would deliver would be proportionate to the quality of the brief we provided. And since we knew there were a large number of issues we could not anticipate, and there were several gap areas, we were hesitant to hire a law firm,” Manoj explains. NFIA helped us plug this crucial gap by referring us to a competent lawyer in the Netherlands who was able to assist us well.

Today, having completed the acquisition, Stellar representatives deeply appreciate the involvement of the NFIA, especially the involvement of Robert Schipper who “went out of his way” to assist them, often taking pains to answer tricky questions.

The acquisition process highlighted the simplicity and effectiveness of the Dutch processes. “Dutch transaction processes are simple and fast,” explains Manoj. “For example, the share transfer process was done in a mere 24 hours by the notary,” he adds.

Stellar’s experience highlights the critical role NFIA can play in handholding Indian companies during acquisition processes. The case particularly demonstrates that even small companies can benefit greatly from contacting the NFIA at the right time during their investment process into the Netherlands.

Source: Mukta; Date: July 2009