Opportunities and challenges of M&A in India

Abstract

The Indian economy has witnessed a major transformation since the government of India introduced the liberalization policies in 1991 .Since then M&A activity in India has picked up pace as foreign companies began to enter and expand their footprint in India. In developed economies especially the US and western Europe, M&A has been prevalent for a long time and is used as a major tool in corporate restructuring. India will continue to present itself as an attractive investment destination due to its high economic growth rate, growing middle class, favorable demographic divide and exceptional management talent. However M&A in India is a challenging proposition primarily due to the nature of its business holdings. Majority of companies in India are promoter held and their motivation of doing deals is different from that of firms run by professional management. Further the regulatory framework is still evolving and needs to be carefully analyzed to prevent post deal issues. In order to achieve the intended results companies must choose an appropriate sector, find relatively small but growing firms and acquire majority stake in those firms. It is imperative to build and manage relationship with the promoter family long before the initiation of deal activity. This would enable firms to be successful in their endeavors, mitigate potential risks and achieve desired synergies.