If we talk about 2018 it was a blockbuster year for deal-making in India, with Merger & Acquisition value exceeding an unprecedented USD 100 billion mark. The year also witnessed a wide range of M&A transactions, including pure play Private Equity/Venture Capital deals, sophisticated platform investments, large consolidations, buy-out transactions etc. Considering the uncertain political and economic climate of 2019, we identify some of the key trends/drivers for M&A activity in 2019:
CAPITAL ACCESS CONSTRAINTS – FINANCIAL SERVICES
Recent liquidity crisis spurred by asset-liability mismatches, Non-Banking Financial Company / Housing Finance Companies across the board are finding it difficult to find bank leverage for further business expansion. As a result, valuations are predicted to be moderated, thereby attracting equity investments into the financial services space. We also foresee significantly high level of securitization transactions, as loan houses are desperately looking for measures to manage short term liquidity requirements.
DIVESTMENT OF NON-CORE ASSETS AND BRAND ACQUISITIONS
With stretched balance sheets and the increasing bad-loan crisis, corporates are actively looking for divestment of non-core assets either to pare debt or to fund further growth. To begin with, public sector banks (e.g. Punjab National Bank) have indicated their intent to dispose-off non- core assets running into millions of dollars to tackle the NPA problem. We expect considerable financial interest in acquisition of these assets. We also anticipate ‘brand acquisitions’ to be one of the key factors influencing M&A a pursuant to divestments, like the Unilever-GSK transaction.
DISTRESSED SALE OPPORTUNITIES
The Insolvency and Bankruptcy Code 2016 has certainly introduced attractive dimensions to the Indian distressed M&A space. With banks being compelled to initiate the IBC process within 180 days of default, several assets are expected to be on the block for insolvency resolution. Despite the legal challenges of the insolvency process under IBC, foreign and domestic players are extremely optimistic about the turnaround potential of several distressed companies.
In 2018 Walmart’s acquisition of Flipkart, Reliance’s acquisition of Hathway and Den, are some of the examples for consolidation transactions. The underlying factors which have resulted in consolidations – viz. access to technology/ distribution channels, bridging resource/ market share gaps, increased operational efficiency, and competition driven activity – will continue to drive M&A in 2019. sell business in india businesses to buy in india businesses for sale in india buy existing business in india sell existing business in india sell existing business in india buy a business in mumbai buy a business in delhi buy a business in gujarat buy a business in kolkata buy a business in bangalore buy a business in ahmedabad buy a business in pune
INDIA’S GLOBAL APPEAL AND SOVEREIGN INTEREST
Equity investors have consistently viewed India favorably over the last few years, 2018 also marked a huge impact. Walmart, Schneider, Amazon etc. are banking heavily on the India story, which is a great vote of confidence. In addition, several sovereign wealth funds have been part of some of the largest investment transactions of 2018 (e.g. CPPIB’s investment into Byju). With sovereign funds like ADIA, CPPIB, Temasek etc. explicitly mentioning allocations worth billions of dollars towards India investments, PE investments anchored by sovereigns can certainly be expected to rise.
CONTROL AND PLATFORM DEALS
2018 witnessing a record value of ‘control transactions. There is a clear indication that seasoned PE players now understand how businesses operate in India and are willing to ‘run the show’ by leveraging their portfolio management experience and by assembling management teams which are in sync with the overall ideology of the investors. Buy-out will continue to rise in 2019, as PE players increasingly perceive complete operational and management control as an ideal mode for value realization. We could also expect growth in platform deals, as global sponsors are looking to partner with GPs who have a clear India play instead of investing directly.
SECTOR FOCUS – FINANCIAL SERVICES AND TMT
While M&A across sectors are expected to remain active, financial services, TMT and real estate will continue to see high levels of activity. Specifically speaking, in the FS domain, NBFCs, HFCs, private banks and insurance companies will likely garner maximum interest. On the TMT front, consumer internet and e-commerce companies will continue to remain relevant and attractive. This is because of rationalized valuations and rigors around capital access. Healthcare services may also see increased investments, given the lack of affordable quality healthcare across the country and the difficulties faced by smaller players to function in the current market.
US-CHINA TRADE WAR
The on-going trade war between US and China may not be entirely unfavorable from an Indian perspective. The Indian government is exploring various avenues to boost manufacturing in India, with a view to increase exports to the US and taper down the current account deficit. Certain sectors which involve manufacturing of products such as automotive parts, chemicals etc. are projected to attract large investments. In addition, while China has traditionally attracted maximum capital from the US for acquisitions, in 2019, India can be expected to see a greater share of acquisitions originating from the US.
GENERAL ELECTIONS 2019
The general perception seems to be one of excessive caution in the run up to the general elections, particularly because of the recently concluded state elections. However, we do not expect M&A to drastically slow down during this phase. The growth story of India remains intact, on the back of robust economic conditions and the investment themes mentioned above. sell my business in delhi sell my business in gujarat sell my business in kolkata sell my business in bangalore sell my business in ahmedabad sell my business in pune businesses to buy in mumbai businesses to buy in delhi businesses to buy in gujarat businesses to buy in kolkata businesses to buy in bangalore