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Mergers and Acquisitions in India

Mergers and acquisitions as we know imply alliance of two or more companies.


Where a merger leads to formation of a new company, acquisition leads to
purchase of a company by other and no new company is formed.
India in recent past has seen great potential in case of Merger and Acquisition
(M&A) deals.

It is being played vigorously in many industrial sectors of the economy.


Many Indian companies have been growing the inorganic way to gain access to
new markets and many foreign companies are targeting Indian companies for their
growth and expansion. It has been spreading far and wide through various
verticals on all business platforms.

History of Merger and Acquisitions in India


After independence, during the initial years, very few corporations came
together and when they did it was a friendly negotiated deal.

The reason behind less number of mergers and acquisitions were due to the
provisions of MRTP act,1969 wherein the firm had to follow a pressurized
procedure to get approval for the same which acted as a deterrent.
The concept of merger and acquisition in India was not very popular until
the year 1988. This year saw an unfriendly takeover by Swaraj Paul to
overtake DCM ltd. which later had turned out to be ineffective.
After the economic reforms that took place in the 1991, there was intense
competition compelled the Indian companies to opt for M&As which later
on became a vital option for them to expand horizontally and vertically.

Drivers of Merger and acquisitions in India


Right to entry: Acquisitions that take place abroad permit Indian companies to gain
access to developed markets across the globe.

Technology transfer: Corporations require technologies to manufacture particular


product or a service which is not available here . By acquiring/collaborating companies
abroad they get access to the technologies.
Hedging Country Risks: Merger and Acquisitions are also attempted to reduce the
reliance on the Indian markets and escape the local business cycles.

Recent trends of merger and acquisition in India


Year 2012 saw a slowdown in mergers and acquisitions in India. It hit a three
year low down by almost 61% from its preceding year. This was majorly caused
by the tough macro-economic climate created due to euro zone crisis and other
domestic reasons such as inflation, fiscal deficit, and currency
Year 2014, has started off on a positive note for inbound M&A deals in India
which has so far seen 15 deals in the first two months. The general elections due
in the coming months would have a huge impact on the on the mergers and
acquisitions in India.
Year
2011
2012
2013

No. of deals
644
598
~500

Value (In billions)


$44.6
$35.4
$30

Challenges to mergers and acquisitions in India


Regulatory Ambiguity: M&A laws and regulations are still developing and
trying to catch up with the global M&A scenario.
Legal Developments: There have been consistently new legal developments
such as the Competition Act, 2002 , the restored SEBI Takeover Regulations in
2011 and also the notification of limited sections of the new Companies Act,
2013, has led to issues in India relating to their interpretations and effect on the
deals valuations and process.
Shareholder Involvement: Institutional investors in the minority position have
become active in observing the investee companies.

Major mergers and acquisitions in India


Bharti Airtel acquired Kuwait based Zain Telecom's African business for USD 10.7
billion which was considered the largest ever cross-border deal in an emerging
market.
Tata steels takeover on Corus in 2007 is considered to be the largest Indian take over
whose deal value was worth $7.6 billion which also made Tatas the fifth largest steel
company.
Vodafone has acquired a 52% interest in Hutchison Essar from the Hong Kong based
Hutchison telecommunications International for about US$10.83 billion.
Subhash Chandra's Essel Packaging (EPL) acquired the Swiss tube packaging major
Propack, to become the world's largest in laminated tubes.

Aditya Birla Group's Hindalco Industries, India's largest non-ferrous metals company,
acquired the Canada based firm Novalis in an all-cash transaction for $6 billion.

Future Outlook
India is becoming a highly sought after destination
for M&A deals.
India must concentrate upon refining the processes,
increasing the simplicity in doing business abroad
and the legalities involved in them
The key to success is keeping fundamentals in
place i.e. to bring into line acquisitions to the entire
business strategy, plan and execute a vigorous
integration process and take adequate awareness
of all relevant regulatory norms.

Knowledge is like a line


with no ends

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