In Mahabharatha, there is a warrior by name Ghatotkacha who played a small but an extremely vital role in helping the Pandavas win. The 14th day of the war stretched beyond sunset and Ghatotkacha was in his elements, wreaking havoc on the enemy. And because he was doing so, Karna (an enemy) had to use his divine weapon to kill Ghatotkacha. You see, Karna was saving that weapon for his battle with Arjun but Ghatotkacha’s fall saved Arjun and the Pandavas. Or you could say, Pandavas lost Ghatotkacha but won the war.

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A few years ago, we lost a Ghatotkacha too.

It was like this – my friend and I came across this little known BPO company. The company had a market cap of about 300 Crs with no debt and had 150 Crs of cash just lying on it’s balance sheet. It was profitable and was making about 30 Crs in profits. It had one new division which was performing very well and growing at about 25% year on year. The company was founded by two first time entrepreneurs. But our sense was that they had lost the hunger to grow. And when analysts asked them what they wanted to do with the unused cash, they said “acquisitions”.

So this company comes into our radar. But instead of being passive investors and let the Management run amok, we want to do a hostile takeover. Our grand plan was to acquire the company for about 300 Crs (Rs 188 per share) and pay the shareholders including ourselves a dividend with the Rs 150 Crs like a cashback. And then we clean the house by getting rid of the the management, double down on the profitable and growing vertical and get rid of any loss making divisions and dress the company up for sale. The logic was: other BPO companies were selling for a lot more and therefore we should be able to get a reasonable price for our dressed up company. In the process, we could possibly double or treble our investments in a couple of years.

Our Plan B, assuming the grand plan of takeover didn’t work out, was to buy enough shares and get a seat on the board and block all resolutions for acquisitions.

However there were a few important roadblocks. For one, we didn’t have Rs 300 Crs. Neither did we have contacts nor knew the first thing about a takeover. This whole hostile takeover was all airy fairy stuff. And hairy too, considering that we had no resources to mount this. But hey, every innovation sounds airy fairy at the outset, no?

So we began to teach ourselves about the SEBI Takeover code. We learnt for example, when company A takes over company B at a price X to the promoters, then A has to make the same offer of X or better to the shareholders of B. In the meantime, we also approached veteran investors to seek their counsel. We knocked doors of a few board members, a few veteran investors and even Carlyle the PE company. Most didn’t answer their doors while others politely told us to go waste our time elsewhere.

After spending a couple of months trying these options and none working out, we began to doubt ourselves. I mean, professionals with experience and money do takeovers; not two amateur investors with no money and no experience. We felt, maybe we were deluding ourselves. We didn’t want to be passive minority shareholders, given that the management was keen on acquisitions. And so we dropped the whole idea (no hostile takeover and no board seats either).

Two months rolled by and then there was this big announcement. Another company had signed a deal to acquire our company at a price of Rs 320 per share! Remember, we dropped the idea thinking it was a bad idea at Rs 188! We wanted to double our investment in a couple of years; and here it almost doubled in 2 months. Except that we didn’t own any shares.

And so it was like watching Ghatotkacha fall in slow motion. It was mostly bitter that we were right and yet we missed out with a little solace that even in Ghatotkacha’s fall there were positive outcomes. For example, it built my own confidence that we were not entirely wrong. I even wrote back to a veteran investor saying “see… I was right and you were wrong in not listening to me“. For another, we learnt the SEBI Takeover code which came in handy while participating in other open offers.

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One of my favorite podcasts is “How I built this”. It’s a podcasts about how founders started their companies and what challenges they faced and so on. There are over 400 episodes and I must’ve listened to over 100. The biggest learning was that most people that are successful today, had self doubts and fears when they were starting off. But it’s important to keep learning and keep moving forward. Failure is not the opposite of success but an ingredient of success.

Thanks for reading!