The Indian Software Products Industry Roundtable (iSPIRT) and Signal Hill, a technology focused middle market advisory boutique, have released first the “India Technology Product M&A Industry Monitor Report”.
It shows that since 2010, there have been 159 M&A transactions involving Indian technology product companies, with a total estimated transaction value of $1.78 billion. Domestic transactions account for 70 per cent of the M&A activity by volume.
However, in value terms, the 48 inbound M&A transactions account for 63 per cent of the estimated M&A transaction value, due to a higher average deal size ($23.3 million versus $6.0 million).
The B2B software segment accounted for 56 per cent of all inbound M&A transactions with foreign players (mostly US and European) acquiring Indian software companies.
On the flip side, e-commerce and internet segments (83 per cent of all transactions by value) dominated domestic M&A, with Naspers’ acquisition of Redbus being the exception.
“In Silicon Valley, technology M&A exits provide liquidity to all the stakeholders in the eco-system, and enable the next generation of tech start-ups. For the Indian product start-up eco-system to flourish, it is critical to drive up the level of Technology Product M&A transactions,” Sanat Rao, who leads iSPIRT’s M&A Connect Program, said. This is an initiative dedicated to facilitating and expediting the cross-border M&A process for Indian software product companies.
While the increasing trend in technology product M&A deal volumes and values in India are encouraging, the Indian M&A eco-system is still in the early stages of its evolution compared to that of the US and Israel.
VC/PEs investment in Israel from 2010-13, for instance, was half that of India ($ 3 billion), but the total technology product M&A deal values in Israel during this period was over six times the transaction value seen in India, mainly driven by a much higher ($ 100 million versus $11 million) average M&A transaction size in Israel.
Growing fast“Part of the reason for the gap in Indian M&A deal value is that VC/PE investment levels in Indian technology product companies have started to pick up rapidly only recently. Hence a large portion of these tech product companies in India are still part of a growing “inventory” of companies that is likely to reach the scale that will put them on the radar of strategic acquirers,” said Klaas Oskam, Managing Director & India Head, Signal Hill.
Dominated by IT services players for the last 20 years, the Indian tech industry has seen a distinct increase in the number of technology entrepreneurs in the last five years.