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Mergers Notes
Mergers Notes
• India in recent past has seen great potential in case of Merger and Acquisition
(M&A) deals.
• 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&A’s 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.
• 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 No. of deals Value (In billions)
2011 644 $44.6
2012 598 $35.4
2013 ~500 $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.
• Tata steel’s 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 Tata’s 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.