According to the CII-PwC report Value Creation: Laying the Foundation for Mergers and Acquisitions, more than 3,400 Indian companies, both in public and private sectors, have been active in mergers and acquisition (M&A) over the last decade (2010-2018).
“Of the more than 6,000 M&A transactions (cumulative, FY10-18), 900 have been done by the current BSE 500 companies. While transactions by BSE 500 companies account for only 15 percent of total M&A volume, they comprise more than 52 percent by value,” the report said.
This indicates that larger companies have been acquiring larger targets (3-5x the average deal size) compared to the overall group, it added.
It further said: “What is also interesting to note is that M&A trends (number and average value of transactions) have been similar for BSE 500 as well as other companies, indicating a close linkage of M&A with macro-economic and sector trends”.
Hiten Kotak, Partner, PwC India said that with increasing number of companies actively looking at M&A as a medium to achieve growth, the key to create value lies in having in place a well-thought target identification approach, carrying out a comprehensive diligence process, having an optimal transaction structure and ensuring a systematic integration process.
The CII-PwC study also noted that India has seen M&A activity in excess of $billion 123.7, 182.6 and 348.3 over the last three, five and ten years, respectively, representing an annualised growth of 13.2, 13.7 and 4 percent, for the respective periods.
At the same time, inbound M&A accounted for 25, 23 and 29 percent of the overall foreign direct investments into the country.
M&A in 207-18, alone accounted for 6 percent of the aggregate gross capital formation.
Pertinent to note is that the growth in value of M&A deals in first quarter of the current fiscal grew nearly 10 fold as compared to the same period last year, while GDP registered a 7.3 percent growth over last year, it added.