Introduction
The past year 2016 have not been an exciting year for Indian Mergers & Amalgamations (M & A) market with the investors acting cautiously because of uncertainty in the new Foreign Direct Investment norms and other tax reforms in the country. The first three quarters of the year 2016 have been very slow for the M& A market in the country but October 2016 have bought back the hopes as it sees total deal value of USD 4.5 billion. The sudden announcement of demonetization has made a patellar reflex on the deals in the pipeline but with the new tax reforms including GST and FDI policy are expected to give a push to M&A deals in 2017.
The Positive Side
India is a dominating country when it comes to M & A deals in the region. As per a recent M & A trend report India is becoming more influential in M & A market in Asia Pacific with M & A deals in the country are reaching a record high and amounting to a total of 8.8% of the total deals in the region, which in the highest in past one decade. The tax incentives provided in the latest budget will boost the confidence of prospective investors.
It is important to note here that mining, energy and utilities are now most active deals replacing the financial services. The Essar group deal is a key contributory with a deal value of USD 12.7 billion. Another high-profile M & A deal which can be attributed here in the merger of Makemytrip and Ibibo.
M & A deals are always a preferred route for foreign direct investment in companies facing problems of cash crunch such as companies in telecommunication and ecommerce industry. Other sector to look for quality M & A deals is renewable energy as it looks lucrative for both FDI as well as greenfield investment.
Challenges
The demonetization has forced many corporates to re consider and freshly plan their business strategies, which could slow down the deal structuring. Also, the tech deals are facing difficulties in finding the prospects as the investor are looking for more realistic valuations in the industry. Tech deals amounted for 89 deals in the year 2015 but 2016 witnessed only 56 deals, making it the largest decline among all the sectors.
Conclusion
Considering the present economic scenario and strong position of India in Asia Pacific market, 2017 should be an action-packed year for M & A professionals. The positive expectation set out by UNCTAD World Investment Report 2016 for the M & A deals in 2017 including cross border gives a reason of joy to the Indian markets.
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