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Amidst significant global challenges posed by high-interest rates, macroeconomic uncertainty, regulatory scrutiny, and geopolitical risks, India’s M&A landscape stood resilient in 2023 and the momentum is expected to remain steady in 2024 and beyond, as per the latest ‘India M&A Trends 2024’ report by Deloitte.

M&A deal value in India was $136 billion in 2023, down 27 per cent from $186 billion in 2022. This contraction was 4 per cent, excluding the outliers, the 2022 HDFC and 2023 Jio deals. This was broadly in line with a global M&A decline of 27 per cent, the report stated. MEanwhile the deal volume fell by 16 per cent Despite these challenges, India’s deals market is expected to remain steady, reflecting strong confidence from businesses and investors amidst a global economic slowdown.

The M&A momentum is expected to remain steady in 2024 and beyond and this is expected to be driven by the manufacturing sector, driven by automotive, with deal growth expected in auto-components and Electric Vehicles (EVs). Further, the Deloitte report stated, “The government’s proactive initiatives to promote clean energy are expected to catalyse a significant rise in M&A within the energy sector. M&A in the FS sector is anticipated to be driven by large-scale consolidations and responses to regulatory shifts.”

PE is projected to remain consistent in 2024, while deal momentum is expected to revive post-2024, supported by flattening interest rates and recovering economic growth. Sumeet Salwan, Partner, Consulting, Deloitte India, said, “The global challenges posed by high interest rates, macroeconomic uncertainty and geopolitical risks, that characterized 2023 are expected to continue into 2024 as well. While the global M&A market remains soft, Indian companies continue to be steered by a strong domestic economy. They may increasingly see M&A as a crucial strategy to help them expand, integrate supply chains and reinforce market positions.”

What are the key factors affecting M&A in 2023?

Continued business and investor confidence in India could pave the way for a recovery in deal values in the country, said Daloitte. This is supported by the IMF raising India’s GDP growth forecast to 6.3 per cent for 2023 and upward trends in indices, such as global composite Purchasing Managers Index (PMI) and Business Confidence Index (BCI).

The rising cost of capital had a notable effect on PE deal value causing India’s PE deal value to decline by 20 per cent YoY, and global PE deal value to decline by 40 per cent.

The share of smaller strategic deals, i.e., mid market deals with a value of $100 million to $1 billion, increased from 20 per cent in 2022 to 35 per cent in 2023. This was due to acquirers taking relatively smaller bets amidst global uncertainties. This resulted in the YoY average deal value to fall by 14 per cent. Significantly, amongst mid-market deals, the FS sector saw the highest increase in deal value of 192 per cent, led by the insurance and stock brokerage segments.

M&A trends across sectors

The Financial Services sector witnessed a 45 per cent YoY decline in deal value in 2023. However, deal volume rose by 23 per cent. Excluding very large outlier deals, deal value rose by 107 per cent. Growth in M&A deal value in FS is primarily fuelled by financial institutions looking to expand scale and broaden product portfolios due to heightened credit demand and a fall in Non Performing Assets (NPAs).

The Technology, Media & Telecom sector encountered a 33 per cent YoY reduction in deal value and a 34 per cent reduction in deal volume in 2023. Technology witnessed a 41 per cent decline in deal value amidst globally falling valuations. Media observed a 21 per cent increase in volume, driven by sector consolidation to create large media platforms. Telecom remained stagnant, observing a modest 2 per cent YoY rise in deal value, driven by consolidation in the telecom infra space.

The Energy sector saw a 63 per cent YoY increase in deal value in 2023, driven by several large deals. However, deal volume fell by 27 per cent. Renewable energy continues to dominate the sector, contributing more than 70 per cent of the deal value largely driven by inbound PE deals.

The Construction & Transport sector witnessed a 44 per cent YoY decline in deal value in 2022. However, deal volume rose by 15 per cent. The real estate segment registered the biggest jump in the sector with 90 per cent YoY increase in deal value in 2023.

The Medical & Pharma sector witnessed a 17 per cent YoY fall in deal value and a 5 per cent fall in deal volume in 2023. Deal value in 2023 was driven largely by the acquisition of hospitals and specialty clinics (67 per cent of total value) by strategic buyers to expand capacity, particularly in tier-II and tier-III cities.

The Industrial & Manufacturing sector witnessed a 33 per cent and 22 per cent YoY rise in deal value and volume, respectively, in 2023. The increase in deal value was primarily driven by the automotive segment. The sector witnessed consistent the Foreign Direct Investment (FDI) inflows. Cross-border deal value rose in manufacturing, growing 97 per cent YoY in 2023.

 

Source : https://www.financialexpress.com/business/industry-indias-ma-deal-value-down-27-yoy-in-2023-manufacturing-sector-to-help-drive-ma-growth-in-2024-says-deloitte-3407985/

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