Mergers & Acquisitions: India Records Higher Deal Value In Q2

India, Australia and China were the top three countries when measured in terms of M&A deal value in Q2, with India accounting for half of the top 20 deals, says a report

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The theme of mergers and acquisitions (M&As) in industries dictate the trends dominating each sector.

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The Asia-Pacific (APAC) region saw a growth of 119 per cent in M&A deal value in Q2 2022 compared with the previous quarter (Q1), despite significant geopolitical and financial challenges around the world, quoted a GlobalData report.

India, Australia and China were the top three countries when measured in terms of M&A deal value in Q2, with India accounting for half of the top 20 deals.

Big mergers in India

India witnessed $82.3 billion worth of M&A deals, pending or completed, in the second quarter, the highest amount on record, according to data compiled by Bloomberg and reported in June. That's more than twice as much than the previous record of $38.1 billion in the third quarter of 2019.

The surge in India was dominated by HDFC Ltd's merger with HDFC Bank for a deal value of $58.5 billion in April.

Another important deal illustrating the changed landscape in technology, aided by volatility in the markets was in May 2022. The pact was the combination of Mindtree Ltd and Larsen & Toubro Infotech Ltd, two software firms controlled by engineering conglomerate Larsen & Toubro Ltd, in a $3.3 billion all-stock deal.

Billionaire Gautam Adani's $10.5 billion deal to buy Ambuja Cements Ltd was another mega deal. Similarly, in June, the Adani group and France's Total Energies entered into a new partnership to jointly create the world's largest green hydrogen ecosystem.

"While conglomerates will consolidate to become stronger and gain market share in their core sectors, there will be renewed or new initiatives around two big themes: ESG and digital," Sonjoy Chatterjee, chairman and chief executive officer for Goldman Sachs Group Inc. in India was quoted in a media report.

The headwinds

Companies in the region are looking to innovative technologies to remain competitive amid the supply chain disruptions and macroeconomic headwinds.

"Despite the major geopolitical and financial headwinds around the world, M&A activity in the APAC region proved resilient in Q2 2022, especially in countries such as India. The two biggest deals seen in India in the quarter were the Housing Development Finance's merger with HDFC Bank for $58.5 billion and the acquisition of a 25 per cent stake in Adani New Industries by TotalEnergies from Adani Enterprises for $12.5 billion," said Snigdha Parida, Thematic Research Analyst, GlobalData in the report.

"Despite the current investor optimism in APAC, rising interest rates and high inflation can still create challenges for the upcoming deals. Global uncertainties like the Russia-Ukraine conflict and the market concerns regarding the impending recession will make companies less likely to undertake deals in the second half of 2022," Parida added.

The overview

The recently published report 'Mergers and Acquisitions (M&A) Deals by Top Themes and Industries in Q2 2022' suggests the M&A market in Q2 2022 managed to surpass the value figures of Q1 2022 as well as that of Q2 2021.

Despite the continued challenge posed by the pandemic and geopolitical tensions in south Asia, the market has shown signs of recovery. The surge in investments can be attributed to the policies of the Indian government, such as the productivity-linked incentive (PLI) schemes.

Economic contraction – either through inflationary and borrowing rate pressure, real wage challenges, consumer spending variability or other factors – will influence transactions but not stifle them. "There's still an abundance of capital in the system for both corporate and private equity (PE) to fund deals. That capital has more opportunities for M&A investment as valuations moderate with market volatility. Whether a company needs to transform its capabilities, supply chains or go-to-market approach, the market is impatient and one of the fastest ways to accelerate transformation is through M&A," said a report by PwC.