India sees record M and A volume in 2021, first-time buyers lead

India witnessed mergers and acquisitions (M&A) at an all-time high in 2021, led by more first-time buyers accounting for more than 80 per cent of the deals closed in 2020 and 2021 -- an increase from less than 70 per cent through 2017 to 2019, a new report showed on Tuesday.

The nature of deals was broad-based, including more mid-sized deals ranging from $500 million-$1 billion, compared to the mega $5 billion deals that drove activity in 2017-19, according to a Bain & Company report.

"The unprecedented flurry of deals seen in 2021 is the result of a higher pressure to grow and a need to seize more opportunities to disrupt, faced by CEOs today," said Karan Singh, managing partner, Bain & Company India and author of the report.

Startups and digital insurgents are driving disruption across sectors from finance to retail to technology, evidenced by two thirds of India's unicorns being added in 2020 and 2021 alone.

While M&A activity has been robust for a few years, the nature of deals in the past 18-24 months has been very different from those of earlier years. Scope and capability deals accounted for nearly half (46 per cent) of all strategic deals above $75 million closed in 2021.

This is way above the 36 per cent of such deals recorded in 2020 and 31 per cent in 2019.

"We are seeing more first-time buyers making bold M&A moves. In many cases, these are not vanilla scale deals, but rather acquisitions to enter new verticals, new geographies, or new capabilities. Even with a sound deal thesis the value creation in such cases is not straightforward," said Vikram Chandrashekhar, partner Bain & Company and co-author of the report.

Reliance has been aggressively growing its emerging businesses through M&A with recent acquisitions in retail, digital, and renewables sectors.

Similarly, the Tata Group is actively reshaping its portfolio and has done over 20 deals in the last two years, including multiple acquisitions such as BigBasket and 1mg to build its super-app.

"We foresee this trend continuing and another exceptional year for Indian M&A in 2022. There is plenty of historic evidence that shows that companies that sharpen their portfolios through acquisitions/divestitures during turbulence do better than the market," said Singh.India witnessed mergers and acquisitions (M&A) at an all-time high in 2021, led by more first-time buyers accounting for more than 80 per cent of the deals closed in 2020 and 2021 -- an increase from less than 70 per cent through 2017 to 2019, a new report showed on Tuesday.

The nature of deals was broad-based, including more mid-sized deals ranging from $500 million-$1 billion, compared to the mega $5 billion deals that drove activity in 2017-19, according to a Bain & Company report.

"The unprecedented flurry of deals seen in 2021 is the result of a higher pressure to grow and a need to seize more opportunities to disrupt, faced by CEOs today," said Karan Singh, managing partner, Bain & Company India and author of the report.

Startups and digital insurgents are driving disruption across sectors from finance to retail to technology, evidenced by two thirds of India's unicorns being added in 2020 and 2021 alone.

While M&A activity has been robust for a few years, the nature of deals in the past 18-24 months has been very different from those of earlier years. Scope and capability deals accounted for nearly half (46 per cent) of all strategic deals above $75 million closed in 2021.

This is way above the 36 per cent of such deals recorded in 2020 and 31 per cent in 2019.

"We are seeing more first-time buyers making bold M&A moves. In many cases, these are not vanilla scale deals, but rather acquisitions to enter new verticals, new geographies, or new capabilities. Even with a sound deal thesis the value creation in such cases is not straightforward," said Vikram Chandrashekhar, partner Bain & Company and co-author of the report.

Reliance has been aggressively growing its emerging businesses through M&A with recent acquisitions in retail, digital, and renewables sectors.

Similarly, the Tata Group is actively reshaping its portfolio and has done over 20 deals in the last two years, including multiple acquisitions such as BigBasket and 1mg to build its super-app.

"We foresee this trend continuing and another exceptional year for Indian M&A in 2022. There is plenty of historic evidence that shows that companies that sharpen their portfolios through acquisitions/divestitures during turbulence do better than the market," said Singh.