India's companies to accelerate merger and acquisition activity, driven by access to new markets

India's companies to accelerate merger and acquisition activity, driven by access to new markets

Investment bankers are forecasting a stellar year for mergers and acquisitions in Asia following a leap in the value of both inbound and outbound transactions in 2010, according the the Financial Times. The paper said that outbound M&A soared 166 per cent to a record $126.1bn in the region (excluding Japan and Australia), according to Citigroup, with total deal flows including inbound and intra-regional transactions jumping 48.8 per cent to a record $470.5bn.

In India, for example, Mukesh Ambani’s Reliance Industries has spent $3 billion in American acquisitions, mostly of shale oil but it ready to invest another $7-9 billion if they can find good deals. Godrej, Jindal, Tata and other groups have made significant buys earlier.

Meanwhile India’s Business Standard newspaper report a similar trend. Among the 41 per cent of Indian companies planning an acquisition in the next three years, the motivational factors for growth are access to new geographic markets (64 per cent ), acquiring new technology or established brands (58 per cent), building scale (55 per cent) and access to low-cost operations (37 per cent). The report says that there’s been a noticeable shift in preference from last year, when acquiring technology or established brands (57 per cent) was the key factor. This year, there’s been a 20 per cent jump in access to new geographic markets, making it the most sought-after medium for growth.

Matthew Hanning, joint head of investment banking for Asia at UBS in Hong Kong says there are very few acquisitions that Indian companies cannot afford to finance. “If the deal and the valuation make sense, there is no shortage of capital” in that part of the world.

Watch out for more global M&A involving Indian companies. This can affect you even if you are not an M&A player. For example your supplier or customer from India could be consumed by a major capital transaction leaving them less bandwidth to focus on you. Alternatively an M&A transaction may suddenly convert an Indian partner into a potential competitor or perhaps into a much better partner. Stay tuned.


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