Is There a Change in the Drivers for M&A in India?
Manoj Dhingra
Ernst & Young
June 2009
What will drive businesses to either buy-in or sell out over the next 2-3 years?
The past year was replete with surprises – both pleasant and unpleasant. Indian companies made global headlines with landmark transactions such as Tata Motors, acquisition of Jaguar and Land Rover and Suzlon’s acquisition of REPower. These were considered very significant for an Indian company. Almost 80% of the Indian transactions of 2008 were cross-border in nature – which in a sense signalled a change in the dynamics of Indian business. Almost all sectors saw active M&A – from infrastructure, to telecommunications, consumer and retails and even transportation and logistics. However, how effective these transactions were remains a question, especially in the light of the experiences of companies that paid the top-dollar valuation and overleveraged themselves in order to fund ambitious expansion plans on the back of projected markets/order books that seem to have diminished significantly.
So, what is the opportunity made available by recession? For countries like India this implies a relative shift in the dynamics of size, markets and segments that previously dominated transactions. Changes in the risk-appetite and drastically altered financial circumstances have led to the emergence of the following key trends:
