Home / News / India /  India’s M&A activity to remain buoyant amid global slump

Bengaluru: Bucking the trend globally, merger and acquisition (M&A) activity in India will continue to grow at a fast clip this year, buoyed by the availability of attractive assets and a positive sentiment as an investment destination, global consultancy firm Bain & Company has said in a report.

“Close to 65% of executives we have surveyed said they expect M&A activity to stay strong in 2023 and this is significantly higher than the global average of 37%," said Vikram Chandreshekhar, partner at Bain & Company.

While, M&A deal value in India recorded a 139% surge last year, there has seen a 36% and 22% decline globally and in the Asia-Pacific region, respectively.

The report also underlined the availability of 53% more attractive assets in India against global markets.

“The willingness of sellers to exit at current valuation multiples primarily qualifies companies as high-quality assets," Chandreshekhar said.

In an interaction with VCCircle, he said that sellers in India are looking to make complete exits from their businesses, allowing for a more seamless asset transfer.

As for multinational corporations, there is improved optimism to invest in India as a long-term investment market. The opportunity is specifically attractive to global firms looking to diversify their supply chains, the report added.

“India stands to benefit from recent supply chain disruptions. The shift is fueling deals in areas such as active pharmaceutical ingredients, specialty chemicals, and contract manufacturing," it said.

Global trade has been hit by supply chain disruptions caused by the coronavirus pandemic, with China being one of the worst-hit nations, and the Russia-Ukraine war.

According to data from the Reserve Bank of India (RBI), aggregate foreign direct investment (FDI) inflows rose to more than $80 billion in the last two fiscal years, through financial years 2020-22, from an annual average of $60 billion in the three years before the pandemic FY 2017-19.

Other factors contributing to the robust outlook include ample private equity (PE) dry powder to deploy, strong balance sheets, confidence among investors to make bold bets on newer sources of growth, particularly amid an economic downturn.

“We are seeing strong M&A activity across sectors, including financial services, utilities, manufacturing, and healthcare. Environmental, social, and governance (ESG) is a new theme and India is emerging as a hotspot for renewables," said Karan Singh, managing partner, Bain & Company.

Among other key themes, startups operating in the consumer tech, fintech, and edtech sectors witnessed the maximum consolidation activity in India in the last few years, the report said.

“Fast growing insurgents are aggressively buying startups. Startups that raised funds before 2022 are now utilizing war chests to acquire companies that have been unable to raise funds and are running out of runway," it added.

Funding in Indian startups dipped by 35%--up to 5 December--to $24.7 billion, compared to the previous year, dragged by a decline in late-stage funding, according to a report by market intelligence platform Traxcn.

Some implications to this fast-paced M&A deal activity include talent retention, as 38% of India-based executives say they experience such challenges, against a global average of 30%, and combining both ESG and digital capabilities in dealmaking to drive multiple M&A deals as these will be key themes going forward.

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