India Inc. is projected to significantly increase its pursuit of overseas acquisitions, according to recent analysis from JP Morgan. This forecast signals a new phase of global expansion for Indian companies, driven by factors such as the desire to tap into new markets, acquire advanced technologies, and diversify their consumer base. Several reports and trends support this outlook, indicating a robust appetite for strategic investments beyond India's borders.
The increasing trend of outbound M&A activity reflects Indian investors' and companies' strong desire to strengthen their portfolios with international investments. Indian conglomerates, including Reliance and Bharti, have been among the most active acquirers, with the United States, Singapore, and the UAE as key destinations. This activity indicates a strategic move by Indian companies to establish a stronger global presence and capitalize on growth opportunities in various markets.
Several factors contribute to this surge in overseas acquisitions. One significant driver is the need for Indian companies to grow inorganically across different geographies. The availability of financing has also made it easier for companies to pursue acquisitions across borders. Entering new markets can be challenging for new firms, especially in developed economies with mature markets and competitive disadvantages, such as high start-up costs and the need to establish dealer networks.
Acquiring foreign companies provides access to established markets and a diversified consumer base, protecting against the risk of dependence on a single market. Developed markets offer relative stability in demand, which can offset the uncertainties associated with evolving markets. Furthermore, overseas acquisitions enable Indian companies to acquire proprietary technologies and access advanced research and development capabilities. These assets complement the existing talent and infrastructure of the acquiring companies, fostering innovation and competitiveness.
In recent years, many Indian conglomerates have focused on acquiring foreign companies with access to natural resources. Sectors like pharmaceuticals, information technology, and energy are particularly attractive for overseas acquisitions. Access to natural resources is often highly regulated and contentious, making acquisitions a strategic approach for securing these valuable assets.
The M&A landscape in India has experienced a significant revival recently. Total deal value increased substantially compared to the previous year, driven by several large transactions. While global deal-making has seen moderate growth, India's M&A market has shown remarkable resilience. Venture capital and growth equity investments have also increased, driven by a strong surge in deal volumes. This overall positive trend indicates a conducive environment for both inbound and outbound M&A activities.
Looking ahead, sectoral consolidation is expected to remain a key trend. India is an attractive destination for foreign direct investment (FDI), with multinational companies keen to acquire Indian businesses for strategic market access, local manufacturing capabilities, and alternate supply chains. Conversely, Indian companies are also evaluating foreign market acquisitions to enhance their global footprint.
The government's support through improved regulations, simplified cross-border merger processes, and enhanced transparency further fuels M&A activity. Amendments that eliminate the need for National Company Law Tribunal approval for certain mergers are likely to encourage reverse flips to India as businesses eye Indian IPOs.
