Why Deloitte Sees Strong M&A Deal Activity In India This Year?

The mergers and acquisitions (M&A) deal activity in India witnessed a solid growth in 2022 and the trend is likely to remain strong this year, according to Deloitte.

The M&A deal activity in India grew 40.5% to $163 billion in 2022 from $116 billion a year earlier, the global consultancy firm said in a report titled India M&A Trends 2023. Total number of deals reached to 911 in 2022, up from 826 a year ago, it added.

The strategic M&A deals grew 125% to $126 billion, primarily due to strong domestic demand, healthy corporates cash flows and low interest rates, Deloitte, said. Private equity (PE) deals, however, fell 38% to $37 billion, hurt by the rising cost of capital, geopolitical uncertainty and rising inflation.

The consultancy expects India’s M&A activity to remain strong in 2023, even as there are global headwinds from rising interest rates and elevated inflation levels leading to increased margin pressures for companies.

Following are the key highlights from Deloitte’s report:

Top Five Transactions In 2022

• HDFC Ltd. merger with HDFC Bank ($57 billion)

• Adani Group acquires Ambuja Cements ($9 billion)

• Bharat Sanchar Nigam Ltd. merges with Bharat Broadband Network Ltd. ($4 billion)

• Biocon acquires biosimilars business of Viatris Inc. ($3 billion)

• MindTree merges with L&T Infotech ($3 billion)

Emerging Themes For 2023

• Strategic M&A activity in 2023 is likely to remain strong, backed by rising domestic demand and the domestic companies’ healthy balance sheets. Deal activity is expected to rise as cash-rich conglomerates focus their efforts on expanding their presence in the Indian market.

• While the recessionary outlook is expected to continue through the early part of the first half of 2023, PE activity is likely to gather momentum in the second half of the year, backed by expected deployment of dry powder, consolidation of PE portfolios, and availability of more conducive valuations.

• The outbound deal activity of Indian corporates is likely to witness continued growth as they remain resilient during a high global inflationary environment. Indian firms with healthy cashflows are likely to capitalize on global opportunities available at attractive valuations.

• Technological enhancement and digital initiatives will likely be the driving force for M&A activity in 2023. Companies within sectors such as technology, media & telecommunications (TMT), financial services, and medical and pharma sectors are expected to leverage M&A to avail of opportunities presented by tech disruption and gain a competitive edge.

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