Mergers and Acquisitions in the Technology Sector: Insights for Q4 2024 – Blog 1/2

This is the first blog in a two-part series detailing the M&A landscape in India in the fourth quarter of FY24.

In Q4FY24, the Indian technology sector witnessed a noticeable shift in mergers and acquisitions, reflecting broader market dynamics and strategic changes in the industry. There have been significant changes in the volume, value and nature of these transactions over this period, providing a complex picture of the current state and future trajectory of the industry.

Decrease in transaction volume

The number of M&A transactions recorded a sharp decline in the fourth quarter of fiscal year 2024, by 53.8% q-o-q. and 58.3% y/y. This sharp reduction indicates a more cautious approach by companies in the face of continuing global uncertainty and market volatility. Factors such as the economic slowdown, geopolitical tensions and changing regulatory landscapes may have contributed to this decline, prompting companies to be more strategic and selective in their acquisition pursuits.

Fluctuations in transaction value

Despite the reduction in transaction volume, the average transaction value showed a mixed trend. It increased by 10% quarter over quarter, suggesting that although fewer deals were closed, they were of higher individual value. On the other hand, the average transaction value decreased by 57% y/y, reflecting the contrasting dynamics and possibly smaller scale transactions dominating the market compared to the previous year. This dual trend highlights the market adapting to new realities, where large-scale transactions are rarer, but significant investments are still occurring in strategic areas.

Change in transaction activity

A noteworthy change in the fourth quarter of FY24 was the change in the type of transactions concluded. Inbound business increased to 39.4% from 18.1% in Q4FY23, indicating growing interest from foreign companies in the Indian technology landscape. This growth underscores India’s growing attractiveness as a hub for technology innovation and talent.

Outbound transaction activity, which includes Indian companies making purchases abroad, remained stable at 15.2%, slightly lower than the previous quarter. This stability indicates continued interest in international expansion, albeit at a cautious pace.

However, domestic transaction activity recorded a significant decline to 45.5% from 66.7% in the fourth quarter of this year. This decline indicates a possible phase of domestic market saturation or consolidation as companies may focus more on strengthening their core businesses or exploring international opportunities.

Type of merger and acquisition transaction

Preferred destinations for mergers and acquisitions

The US continued to be the preferred destination for outbound M&A deals by Indian technology companies. This preference highlights the strategic importance of the US market for Indian companies, both due to its size and technological advancement.

The US also leads in inbound M&A deals, followed by Indonesia and the UK. This move from Germany to Indonesia as a significant investor marks a strategic pivot, reflecting the dynamics of emerging markets and the evolving global technology landscape.

To learn more details about these mergers and acquisitions and their strategic rationale, read my next blog in this series.

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