How India is bucking the global dealmaking downturn

M&A deal volume and value reach record highs in India in 2022, despite slower dealmaking globally – as scope activity and acquisitions in renewables surge

In India, deals are flourishing like nowhere else.

M&A deal size in the country hit record levels in 2022, worth US$138 billion, marking a staggering growth of 139%, bucking the current global trend.

That’s according to the latest Bain annual Global Mergers & Acquisitions Report, which showed strategic M&A deal volume and value in India to be at an all-time high.

This comes as most countries saw their M&A deal volumes and values fall amid inflation, interest rates, geopolitical tensions, and increased regulatory oversight.

While deals got done across the world, overall deal value fell during the year, with multiples dropping from record highs in 2021 and fewer large deals. Declines in multiples along with a mid-year pause in megadeals contributed to a 36% decline in deal value following a blockbuster 2021.  

So, why is India bucking the global dealmaking downturn?

Various factors have come together to create the perfect environment for dealmaking, Bain reveals. As well as corporate balance sheets remaining solid, the country’s record levels of cash and availability of assets as helped deliver a boom.

Foreign direct investment has held to the point at which India is a global hotspot as an attractive non-US destination for capital. Sellers are responding to high multiples and bringing more asset to the markets, and acquirers are ready to move on them.

India dealmaking trends – scope activity to startup acquisitions

Dealmaking in India in 2022 was characterised by various themes, according to Bain, among them established domestic companies turning to M&A to consolidate. Take India’s biggest merger announcement ever – HDFC, the mortgage firm, which signed on to merge with HDFC Bank in a deal valued at US$40m.

In an ongoing India dealmaking trend, fast-growing insurgents continue to aggressively buy startups, with much of this activity across consumer tech, edtech, and fintech.

Last year saw eight-year-old Razorpay, a fintech quickly building a financial ecosystem for businesses around payments and banking, complete its purchase of loyalty and engagements solutions start-up PoshVine – marking the fintech’s seventh acquisition.

Also, many companies are buying online businesses and combining them with their offline presence to create omnichannel offerings for consumers. Like Aditya Birla Fashion and Retail, which bought controlling stakes in Beakoof, Urbano, and multiple other brands as part of its effort to create a new digit-first house of brands.

Scope deals also proved popular, like Torrent Pharma’s acquisition of skincare player Curatio Healthcare to strengthen that part of its portfolio.

With scope activity, Bain’s New Delhi Partner Karan Singh says that India’s conglomerates are “making bets on new growth engines and future profit pools that offer higher multiples than their traditional businesses”.

India’s opportunities – renewable investments

Among opportunities in dealmaking that were prevalent in 2022 and are likely to continue into 2023 is investment in renewables. This is in large part thanks to the Indian government’s ambitious energy transition policies, including the National Green Hydrogen Mission, which is increasingly pushing conglomerates and traditional energy companies to invest in renewables.

In line with the government’s mission, Adani turned to M&A in 2022 to pursue a goal of becoming the world’s largest integrated hydrogen producer, making acquisitions across the value chain of solar and renewables. Multinationals are making similar plays, like Shell’s purchase of Solenergi Power and the Spring Energy group of companies.

India is also increasingly becoming a prime alternative for global companies keen to diversify their supply chains, meaning the country stands to benefit from supply chain disruptions.

“The shift is fuelling deals in areas such as active pharmaceutical ingredients, specialty chemicals, and contract manufacturing, where private equity players are acquiring serials assets and rolling them up to create one large platform,” says Karan.

Looking to 2023 and beyond – positive outlook for India

Looking to the year ahead, positivity about dealmaking reigns supreme among India-based executives.

Three-quarters (75%) said they expect that there will be more attractive assets available, quite a big higher than the global average of 53%. And 64% of those India execs say they expect the likelihood of closing acquisition will increase in 2023, again more than the global average of 37%.

That said, there are potential hiccups. Bain points to further aggressive hiked interest rates by the government which could result in the slowdown of M&A activity.

“As we’ve seen in the US and other markets, the large increase in interest rates starting in mid-2022 played a big role in M&A activity contracting by 36% globally,” Karan says.

With the potential for a downturn globally, and in India, Bain urges companies to develop a highly tailored integration approach that will protect the target’s business but also lays the appropriate integration playbook for realising synergies that will bolster the top line – this includes proactive, customer-centred, and data-driven sales playbook integration, product portfolio integration, and go-to-market integration.

And with talent experiencing disruption, Bain says companies must prepare for the reality that merge integration only increase the risk of attrition – 38% of India-based executives say they often or always experience challenges with talent retention after deal completion, higher than the 30% lo al average.

“So, executives need to expand people diligence, creatively read the talent landscape, and design integrations with retention in mind,” says Karan.

Finally, Bain advises companies to combine both ESG digital capabilities in dealmaking to drive multiple expansion. “Both will remain long-term creation hotspots over the next decade, and the best companies will make them key considerations in their M&A activity.

Advent International’s acquisition of a controlling stake in Avra Laboratories is an example of this, as it combined that company with RA Chem pharma and ZCL Chemicals, two previous firms it had purchased. Similarly, global investment firm PAG led a consortium that bought a controlling stake in the pharma firm Optimus Group.


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