Given the demand and growth opportunities for various products and services, with regard to the changes in lifestyle and awareness among the people; all the major business giants are seeking to scale up their businesses overseas. A profusion of growth drivers including the advancements in technology and globalization, digital transformation, innovation, mergers and acquisitions, high cash flows, customer-centricity, agility and scalability of operations that enable the expansion of business are creating multiple growth opportunities in the country. While each of these collectively works out to bring a change in the comprehensive success of an organization, Mergers, and Acquisitions specifically carry higher advantages.
The Indian economy experienced a turbulence in the last few years, serving to the introduction of Goods and Services Tax (GST) and Demonetization. This made the foreign companies think twice before getting into Mergers and Acquisitions; most of which switched to organic growth as an alternative to this. This further resulted in an evident downshift in the number of such transactions. The Mergers and Acquisition firms in India noticed a downfall of 10% in the number of deals in the year 2017, as per the reports extracted by KPMG in India’s CEO Outlook 2018 survey. Overall, only 11% of the M&As were considered a priority by the Indian CEOs. This phase was considered ‘optic but not yet upbeat’, while the firms were still cautious on variables like oil prices and interest rates.
Despite this, the year, 2018 had been looked at as the year when the M&A deals observe a hike. The global inclination for M&A deals is projected to rise by 5%; according to the information gathered from KPMG’s M&A Predictor Report. The quarter ended March 2018 showed that due to the increasing business opportunities in India, both the Indian and global economy are on a comeback. Industries such as financial services, steel, automobile, cement, and real estate are all moving in a positive direction. The past four to five months have observed a stabilized economic landscape, thereby building confidence and interest in the country’s CEOs. Irrespective of the valuations being high, the organizations are not ecstatic about big spends. However, a renewed optimism has been observed in the steel and cement industry, in regard to the stressed assets.
A report extracted by EY states that there were 1,011 deals, taking place in the Indian M&A sector for USD 40,961 million in the year, 2017. The Flipkart-Walmart deal has given a massive boost to the Indian M&A sector. The reports suggest that Indian is going to observe a hike in the number of deals in the next few years. The Indian government is also playing its role in the increasing number of deals in the country. Almost all relevant laws and regulations had been revamped in the last few years. The largest M&A deals to be consummated included Russia’s Rosneft PJSC agreeing to acquire Essar Oil Ltd., Flipkart acquiring the Indian arm of eBay, Axis bank taking over FreeCharge, the mobile payment application, Ola acquiring Foodpanda, and the SBI Associates merging into SBI, thereby enhancing the muscle power of the public sector. Business leaders in India use Globalization from the time of trade wars and tariff barriers as another reason to be open to M&As; thereby using it as a strategic step to head to newer markets with the help of available business consultancy services in India.
[i] https://www.livemint.com/Companies/akzGrtIAxkMbwWU9M23bLM/A-stabilizing-Indian-economy-driving-MA-deals-in-India.html
[ii] http://www.forbesindia.com/blog/legalese/mergers-and-acquisitions-outlook-in-india-for-2018/ https://www.entrepreneur.com/article/315658
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