Amidst global economic challenges, India’s mergers and acquisitions (M&A) market in 2023 showcased adaptability and resilience. With transactions worth $136 billion, a 27 per cent decrease from the previous year, the market sustained economic expansion and unwavering business confidence.

Traditionally dominant sectors like financial services (FS) and technology, media and telecom (TMT) saw declines in overall value — FS by 45 per cent and TMT by 33 per cent. Large-scale consolidations and restructuring mainly drove M&A activity. The decrease in TMT deal value was primarily due to fewer technology transactions. This was partially offset by consolidation efforts in the media segment to establish large-scale media platforms. Further, the energy sector emerged as a highlight with a 63 per cent increase in deal value, driven by renewable energy transactions.

One of the noticeable trends of 2023 was the increase in cross-border investment, accounting for 51 per cent of the overall deal value. This was driven by inbound deals, a significant share in overall M&A, rising to 41 per cent and totalling $55 billion. This increase was propelled by interest from strategic buyers due to strong domestic demand and favourable government policies. Conversely, outbound deals witnessed a decrease by 49 per cent in 2022. The cautious investment sentiment amongst Indian firms in 2023 can be attributed to global uncertainties. Nonetheless, the industrial and manufacturing sector stood out, registering a significant growth in outbound deal value from $0.9 billion in 2022 to $2.6 billion in 2023. This growth was fuelled by automotive acquisitions of technology capabilities abroad.

A look ahead

In 2023, automotive M&A activity increased by 97 per cent, with a focus on the auto-components and EV sectors. This trend is expected to continue as companies navigate the evolving emission standards and a growing emphasis on premiumisation. In future, traditional auto-component firms are likely to continue bolstering their EV capabilities through strategic acquisitions. Simultaneously, the sheer number of EV OEMs in the market makes this space ripe for consolidation, amplifying M&A activity.

In the Indian renewable energy space, M&A activity is expected to be driven by India’s ambitious vision of achieving 500 GW of clean energy capacity by 2030. With solar energy capacity increasing 30-fold over the past nine years, the industry is expected to undergo consolidation as competition intensifies and government incentives fuel capacity growth. Inbound investment, primarily from private equity (PE) investors seeking to enhance their green portfolios with solar and wind assets, is expected to persist, driven by increasing energy demand and ambitious capacity targets. In addition, the ascent of energy storage as a pivotal focus is poised to stimulate further M&A activity.

To capitalise on the underlying demand for financial products in the growing economy, and tap the underserved market segments, banks and non-banking financial companies (NBFCs) are expected to continue large-scale consolidations as well as select acquisitions. Micro-finance institutions, small finance banks, and PSU regional rural banks can expect to see some degree of consolidation as they aim to increase the scale of operations and ensure adequate capitalisation.

The Indian M&A landscape is expected to rebound despite prevailing global challenges, such as high interest rates and uncertainty amidst geopolitical issues. This improvement is expected on the back of strong domestic economic fundamentals, growing investor confidence, and favourable regulatory interventions.

Jaswal is Partner, Consulting, and Gupta is Associate Director, Consulting, Deloitte India. Views are personal

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