Mergers and Acquisitions: Current Trends in India

In 2021, India witnessed an all-time increase in the mergers and acquisitions rates mostly, carried on by first-time buyers. The disruptors or insurgents influence this growth in multiple sectors of the economy. According to the 2021 report published by the Management consulting company, 85 deals were finalized worth USD 75 million. The first-time buyers constitute 80% of the volume of the total merger and acquisition. In India, big industries like Reliance and Tata Group observed steady growth closing over 25 deals in the last two years. The innovation and progression led to these mergers and acquisition activities in retail, digital and durable consumer markets.

Government Policies to Boost Merger and Acquisitions in India

The Government of India has introduced a few reforms to boost the growth of M&A in India.

1. The issuance of Shares with differential voting rights prescribed by SEBI to exercise better control.
2. The registered start-ups were granted lucrative tax incentives and exemptions to boost M&A in start-up sector.
3. The introduction of corporate tax rate reduction increased the growth of M&A.
4. The rate of investments through foreign companies has increased after the inception of the PLI scheme in 2021.
5. The elevated privatization in India has motivated many multi-national companies to take over or merge with Indian firms.

In addition to this, Government movement like the Self-Reliant India Movement (Atma Nirbhar Bharat) has bolstered foreign investments, mostly in the manufacturing sector. The initiation of this program led to profitable M&A in India.

The announcement of the Self-Reliant India Movement is based on the five pillars: economy, system, infrastructure, vast demography, and demand. With this, Government also proposed relaxation in corporate and employment tax and in other security laws compliance.

The allowance of 100% FDI in a different sector under the automatic route also affects the rate of mergers and acquisitions in India. The Government proposed different policy reforms in sectors like coal, mineral, defense production, civil aviation, etc. Also, the announcement of a product-linked scheme has accelerated FDI in the pharmaceutical sector. All these, reforms and initiatives enabled sustainable growth in the merger and acquisition activities in India.

Current Emerging Mergers and Acquisitions Trends in India

The popular trends determine the quantum of M&A activity in the Indian market:

1. Since the inception of liberalization, different multi-national companies have entered the Indian market through joint ventures or mostly through acquisitions. Examples of these acquisition activities are the Wipro-GE Medical system and Coke-Parle.
2. The emergence of a new concept called Reverse Merger initiated several activities like raising money from the public. In a simple context, it is called a reverse merger when a large company merges with a small company. One of the important mergers in 2002 that were initiated through this type of merger was when ICICI and two of its subsidiaries, ICICI Personal Financial Services, and ICICI Capital Services, merged with ICICI bank.
3. The special order passed under Section 396 of the Companies Act, 1956, allows the amalgamation of two or more companies for benefit of public interests. The economy welcomed this Government’s initiative to merge companies to safeguard the investors’ rights.

It is also important to understand the factors that influence these trends are:

• Democratization of Mergers and Acquisitions.
• Scope of significant momentum in deals.
• Increase in the purchasing power of the insurgents.
• Surging rate of investment trend among foreign investors.

The strong relationship of cross-border Mergers and Acquisitions.

Major Mergers and Acquisitions in Recent Years

The year 2021 was successful in closing some of the important Merger and Acquisition deals. Some of the crucial mergers and acquisitions in 2021 are

• Prosus acquires Bill desk at USD 4.7 billion – In the Indian fintech industry, the acquisition between the technology investors Prosus NV and Indian payment giants Bill Desk is one of the significant steps. This acquisition benefits PayU, a Prosus-owned Fintech business. After this, PayU has been able to increase the total payments volume by over USD 4 billion.
• Piramal Group acquires DHFL at USD 4.7 billion – Piramal Group acquired Dewan Housing and Finance Limited for USD 4.7 billion through non-convertible debentures and cash components.
• Tata Digital acquires Big Basket – In 2021, Tata Digital acquires Big Basket to plan to build its own Super App.
• Merger between Zee Entertainment Enterprises And Sony Pictures Network India- Both companies agreed to share their digital assets, linear networks, production operations, and program libraries. The companies entered into a non-binding term sheet, with Sony Pictures Entertainment being the major stakeholder.
• Adani Green Energy Limited took over SB Energy India – In the mid of 2021, AGEL closed the cash deal of acquisition of SB Energy Holdings Limited for USD 3.5 billion. This acquisition is considered to be the largest in terms of volume.
• Pharm Easy acquires Thyrocare at USD 610 million – The acquisition between Pharm easy and Thyrocare made the former the first Indian start-up company to acquire a public listed company. These activities will enable Pharm Easy to develop an end-to-end healthcare platform by utilizing a chain of diagnostic and preventive care laboratories run by Thyrocare.
• Byju acquires Aakash Educational Services through around USD 1 billion cash equity deals.

How Can Strategic and Operational Consulting Firms Help?

Business consultancy firms like Tecnova offer complete execution of business deals by enabling business opportunities in India. With a team of great expertise in Mergers and Acquisition activities, they help foreign companies get fair deals. They have carried on a plethora of complicated business transactions, offering maximum client benefits. Companies like Tecnova Global have successfully assisted clients in closing some notable mergers and acquisitions. The following are the step-by-step services:

1. Preparation of deal by identifying and shortlisting firms.
2. Structuring deal strategy and valuation and sorting the negotiation process.
3. Application of regulatory approvals and drafting of legal documents.
4. Providing assistance in post-acquisition activities.

The past years have experienced some important merger and acquisition activities in India. Meanwhile, with Government’s initiation, foreign investors are keen to fund different sectors in India. The increase in rate of merger and acquisition activities in India has led to high competition among MNCs and Indian businesses, making India a potential economy.

‍Reference

• https://bit.ly/3FmghJ2
• https://bit.ly/3MUMSIx
• https://bit.ly/3kGw9MK

‍