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National: Boston Consulting Group (BCG) today announced the launch of a new report on M&A (mergers and acquisitions) in India focusing on how companies can use M&A as a value creation lever during uncertain times, with insights on market landscape, trends, and managerial imperatives.

Global M&A activity spiked in 2021 after the COVID-19 induced decline in 2020. 2022 saw a reversion to pre-COVID levels globally, however, India was an exception and showed continued M&A acceleration through 2022. Indian M&A activity spanned new age "start-up" acquirers in hyper-growth mode as well as larger established companies and mature corporate acquirers. Companies used acquisitions as a lever for long-term advantage, focusing not only on their core business but also on capability builds, business model extensions and adjacency plays.

Said Kanchan Samtani, Managing Director and Senior Partner, BCG India, Asia-Pacific Head of M&A and Transactions, “Irrespective of your company’s current scale and maturity, M&A can be  an important lever to accelerate growth of your core business, tap into adjacent revenue pools and develop long-term capabilities. Clear strategic and financial objectives are key to identifying potential target(s) best suited for your organization and portfolio and having high conviction in the business case.”

Looking ahead, given the macroeconomic uncertainty, there is some degree of conservatism being observed as acquirers appear to be taking relatively smaller bets than before. However, M&A momentum in India should benefit going forward from supply-side build-up of large corporate cash balances, significant capacity to raise debt, and record levels of private equity "dry powder". Said Akshay Kohli, Managing Director and Partner, BCG, “Swift capital deployment in the coming quarters is imperative to deliver returns for both private and public market investors given the buffer that has steadily built up. M&A will be one of the key channels for capital deployment.”

Periods of uncertainty such as the present one, while challenging, offer the opportunity to identify quality assets with attractive business fundamentals. In a tougher economic environment, there are typically companies with strong fundamentals experiencing temporary performance pressures which could be attractive targets for prospective acquirers. Our research indicates that lower-growth-economy acquisitions pay-off in the medium term, delivering higher shareholder return than strong-growth-economy deals. Current valuations also suggest there is opportunity to pursue deals in select pockets of the market where valuations have corrected to more reasonable levels.

One of the thematic M&A opportunities seeing increasing traction both globally as well as in India is "green" investing. Early indications suggest that “green deals” deliver 6.5x greater relative total shareholder return when compared to “non-green deals” over a two-year period. This is because companies with a focus on sustainability are able to create business value through multiple levers such as better financing access, avoidance of carbon taxes and other regulatory risks, operational cost savings through decarbonization-related efficiency gains and volume upside potential from products that are more climate-friendly.

Based on the insights, the report lays out the imperatives for CEOs, CFOs and Boards of organizations:

* While M&A can be a growth engine and powerful value creation lever for most companies, especially in today's market environment, strategic, financial and execution discipline and focus are critical to unlocking not only strong but also long-term sustainable value from deals

* Buyers must proactively be on the lookout for targets with the right strategic fit, build razor-sharp conviction in the business case and setup best-in-class integration capabilities to realize the full value potential

* Sellers must understand the needs of their future investors, build strong proof points to buttress their equity narrative, and plan in advance to mitigate any separation challenges

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