Mergers and acquisitions (M&A) in India are expected to increase in 2023, as global companies remain keen on growing their presence in India, according to a report by consulting giant Deloitte.
This would further be fuelled by increasing domestic demand in the country, supported by availability of companies with healthy financials, Deloitte said in its latest India M&A trends report.
“With Indian economy likely to do well despite global economic headwinds, we expect that M&A activity in India will remain robust, with companies expected to continue picking up attractively valued targets in India and abroad,” said Mayank Jaswal, partner - consulting, Deloitte India said in a statement.
Well-capitalised Indian companies are likely to invest to acquire key technology capabilities with large deals likely in sectors such as technology, media & telecommunications (TMT) and financial services sector, the report said.
The positive outlook comes on the back of high growth in India’s M&A market, which grew by 40% to cross $160 billion in value in 2022 . A large number of these deals were strategic M&A deals, which grew 2X to 126 during the year, compared to 56 deals in 2021.
“Domestic companies had healthy balance sheets and were able to deploy their cash to do more deals,” said Jaswal.
Private equity (PE) deal activity, on the other hand, fell by 38% to 37 deals in 2022, as rising cost of capital dampened the return on investment, further worsened by geopolitical uncertainty and rising inflation.
“Due to lack of PE activity as well as inflationary pressures impacting margins, valuations have tempered, and these are expected to help drive the pickup in the PE activity by H2 (second half) 2023,” the report said.
Going forward, in 2023, Deloitte expects more companies in TMT, financial services and pharmaceutical to use more M&A opportunities, considering the need for technological enhancement to gain a competitive edge.