Bain & Co. : Indian M&A Activity Persists Despite Global Economic Slowdown
- ByStartupStory | January 31, 2023
Despite a global slowdown in mergers and acquisitions, India continues to see a surge in M&A activity, according to a report by Bain & Company. The country saw a 36% increase in deal volume and a 139% increase in deal value in 2022, making it the fourth year in a row that M&A activity has hit a record high in India.
Conversely, the global M&A market saw a 36% decline in deal value and a 12% decrease in volume, largely due to macroeconomic factors such as interest rate hikes by the US Federal Reserve Bank.
Deals valued over $5 billion stood at 61% of the total deals in 2022 compared to 35% of the M&A deals closed in 2019. Further, 2020 and 2021 did not see any deals of over $5 billion in value.
Vikram Chandrashekhar, Partner at Bain & Co. stated “There are three spaces of deal activity in startups. There are standard scale deals, for example, the acquisitions made by upGrad last year to expand its business. There are also insurgents looking to enter new segments such as Razorpay’s acquisition to build an ecosystem around payments for businesses,”
According to the report by Bain & Company, the themes behind the high M&A activity in India are consolidation, growth-seeking acquisitions by conglomerates, and the takeover of smaller startups by fast-growing companies in sectors such as consumer technology, fintech, and edtech. Additionally, the focus on energy transition policies has also contributed to an increase in M&A activity in the renewable energy industry.
“There is also the theme where a company is trying to add new capabilities such as Gupshup’s acquisitions around AI and cloud computing to improve customer experience on the platform.”, he added.
In addition to these overarching trends, the report highlights that companies’ efforts to diversify their supply chain through a “China plus one” strategy is fueling M&A activity, particularly in areas such as active pharmaceutical ingredients, specialty chemicals, and contract manufacturing. According to a survey conducted by Bain & Co., executives predict that M&A momentum will persist in 2023, with 64% of respondents indicating an increased likelihood of closing an acquisition in the coming year.
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