By Wasana Nadeeshani Sellahewa
(Commonwealth) _ Despite global economic and geopolitical uncertainties, India’s M&A market showcased resilience in 2023, as per Deloitte’s ‘India M&A Trends 2024.’ Despite challenges like high-interest rates and regulatory scrutiny, the report highlights the market’s robustness, reflecting the confidence of businesses and investors amid a global economic slowdown. This resilience stands as a testament to India’s stability and attractiveness in the face of adverse global conditions, positioning the country as a noteworthy player in the international M&A landscape. The report underscores the ability of the Indian market to weather challenges and maintain investor trust, offering a positive outlook for future M&A activities.
Driving Forces in 2023
The manufacturing sector, propelled by the automotive industry, emerged as a significant driver of M&A activity. Anticipated deal growth in auto-components and electric vehicles (EVs) underscored the sector’s resilience. Notably, the industrial and manufacturing sector experienced a substantial 33% rise in deal value and a 22% increase in volume in 2023 compared to the previous year.
Sumeet Salwan, Partner, Consulting, Deloitte India, highlighted that despite ongoing global challenges, Indian companies view M&A as a strategic tool to expand, integrate supply chains, and strengthen market positions, leveraging the strength of the domestic economy.
Sectoral Dynamics
The government’s initiatives to promote clean energy are expected to catalyze a surge in M&A within the energy sector. Additionally, the financial sector is anticipated to witness M&A activities driven by large-scale consolidations and responses to regulatory shifts.
While private equity (PE) is projected to remain consistent in 2024, the report suggests a revival in deal momentum post-2024, supported by flattening interest rates and recovering economic growth.
Key Metrics and Trends
In 2023, M&A deal value in India decreased to $136 billion from $186 billion in 2022. The financial services and technology, media, and telecom (TMT) sectors maintained their positions as the top drivers of M&A, despite a decline in deal value and volume.
The financial services sector experienced a 45% decline in deal value and a 23% increase in deal volume compared to 2022. The TMT sector encountered a 33% year-on-year reduction in deal value, accompanied by a 34% decline in deal volume.
Cross-border deal value witnessed an 11% decline in 2023. However, inbound deals saw significant growth, constituting 41% of the total, up from 27% in 2022. On the contrary, outbound M&A deal value experienced a notable 49% decline compared to 2022.
In the energy sector, there was a remarkable 63% increase in deal value in 2023, driven by growing interest in renewable energy and clean energy initiatives, attracting foreign investors.
The construction and transport sector saw a 44% decline in deal value compared to 2022, contributing 29% to outbound deal value. Meanwhile, the medical and pharma sector witnessed a 17% fall in deal value from 2022, primarily influenced by strategic buyers seeking scale expansion.
Outlook for 2024
Looking ahead to 2024, the report projects that India’s M&A market will remain steady, driven by strong confidence from businesses and investors. The manufacturing sector, particularly in automotive and clean energy, is expected to continue stimulating deal activity. Private equity is forecasted to maintain consistency, with a potential revival in deal momentum post-2024.
Conclusion
India’s M&A landscape, despite global challenges, stands resilient and anticipates continued stability in 2024. The sectoral dynamics, shifting cross-border trends, and the influence of governmental initiatives in clean energy signal a dynamic and evolving landscape. As businesses navigate uncertainties, M&A emerges as a strategic lever for growth, integration, and market positioning in the evolving economic scenario.
