Mergers and Acquisitions Activity in India in 2021

Mergers and acquisitions (M&As) reached an all-time high in India in 2021 driven by first-time buyers and led by a growth of industry disruptors, or insurgents, across multiple sectors and business activities. We look at the numbers published by various consultancy reports that outline the hot acquisitions market in India and discuss motives behind major deal making.

According to a recent report by Bain & Company titled “India M&A: Acquiring to Transform”, merger and acquisition (M&A) activity in India was at an all time high in 2021, driven mainly by first-time buyers. The Bain study reports that in 2021, India saw the finalization of 85 strategic deals valued over US$75 million, out of which first-time buyers accounted for 80 percent of the volume.

The disruptions led by the Covid-19 pandemic further accelerated the acquisition trend in India, where companies have been opting for the acquisition route to secure higher rates of growth. The greater deal momentum is a result of buoyant cash reserves and the FDI inflows available with the corporate sector, coupled with low interest rates and other favorable conditions. As per data by financial market tracker Refinitiv, M&As in India reached a three-year high after deals worth US$90.4 billion were struck in the first nine months of 2021. The same data also revealed that the average deal value stood at US$105 million till September 2021.

India’s mergers and acquisition trends in 2021

The pandemic-led disruptions further augmented the role played by technology. This has been thoroughly leveraged by start-ups and digital insurgents across sectors like finance, retail, technology, manufacturing, logistics, etc. Its no wonder then that India added over 55 unicorns in the past two years alone. Major sectors that have emerged as lucrative hotspots for acquisition activity include renewable energy, electric vehicles, consumer durables, EdTech, and Fintech. Favorable policy support as well as falling prices have made India an attractive destination for renewable investments.

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It is reported that while most acquisitions were led by first-time buyers, no mega deal over US$5 billion was struck in the year 2021, unlike the trend in 2016-19. For the years 2020 and 2021, the percentage of first-time buyers has been the highest compared to the percentage for the years 2016 till 2019. In 2021, the nature of deals was broad based, including more mid-sized deals ranging from US$500 million to US$1 billion. Two-thirds of these deals finalized by insurgents are stock-plus-cash transactions.

Also, the nature of deals in the past 18-24 months has been quite different from the years before. Scope and capability deals accounted for nearly 46 percent of all strategic deals valued at above US$75 million that were closed in 2021 – much higher than in 2020 (36 percent) and 2019 (31 percent). Scope deals (acquisitions outside a company’s core business) are steadily growing their share of deal volumes, often addressing disruptive themes, such as digital or renewables.

Another notable trend observed in 2021 is the rapid expansion of industry insurgents across sectors, geographies, and business fields. These companies are aggressively trying to upscale capabilities to deliver a comprehensive omnichannel experience to consumers. For instance, EdTech insurgent BYJU’s has made over 11 acquisitions valued at over US$2 billion, of which approximately $US1 billion went towards acquiring Aakash Educational Services, an offline test prep company, to build an omnichannel learning offering for its test-prep vertical. Oyo, too, has entered many new geographies to expand its scale of operations.

Top M&A deals in India in 2021

Piramal Group acquires DHFL at US$4.7 billion: In 2021, Piramal Group completed the acquisition of Dewan Housing and Finance Limited (DHFL) for US$4.7 billion, which includes a cash component and non-convertible debentures.

Prosus acquires BillDesk ay US$4.7 billion: The acquisition of Indian payments giant BillDesk by technology investors Prosus NV was the largest merger and acquisition deal in the Indian fintech industry. Prosus has its own Fintech business PayU. This acquisition will help PayU to become one of the leading online payments providers, globally, with presence in over 20 markets and increased total payments volume (TPV) of over US$4 billion.

Adani Green Energy Limited (AGEL) acquires SB Energy India: In May 2021, AGEL completed the acquisition of SB Energy Holdings Limited (SB Energy India) in an all-cash deal worth US$3.5 billion. This is the largest acquisition in the renewable energy sector in India.

Tata Digital acquires BigBasket: In a bid to build its own SuperApp, Tata Digital acquired India’s biggest groceries delivery company BigBasket.

Merger between Sony Picture Network India and Zee Entertainment Enterprises: Both companies have entered into an exclusive, non-binding term sheet, in order to combine their linear networks, digital assets, production operations, and program libraries. The merged company would be a publicly listed company in India with Sony Pictures Entertainment holding the majority stake.

PharmEasy acquires Thyrocare at US$610 million: PharmEasy has become the first Indian start-up to acquire a publicly listed company Thyrocare, which runs a chain of diagnostic and preventive care laboratories. The acquisition will enable PharmEasy to build an end-to-end healthcare platform from a customer’s point of view.

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