PwC India expects an increase in the number of mergers and acquisitions of small and medium-sized enterprises

New Delhi: PwC India expects a revival in Indian markets, especially in small and medium-sized M&A (M&A) deals and growth financing driven by rising investor confidence.

2023 witnessed the emergence of a diversified M&A landscape with investors showing interest in diversified strategies and larger-scale ventures, even with an overall decline in PE investments, said Sanjeev Krishan, president, PwC India.

Although PE deal volume was higher, strategic deals dominated the top deals, with domestic deals involving group-level consolidations being the dominant theme. In the first quarter of 2024, the value and volume of transactions increased again.

According to the PwC report, the top 10 deals of 2023 included JV buyouts, strategic investments, PE buyouts and equity mergers, accounting for 21% of the total deal value. Although overall PE transaction volume was higher, the most important transactions were dominated by strategic transactions, with domestic transactions and group-level consolidations being important themes.

“From a sector perspective, traditional sectors are leading, including retail and consumer, as well as healthcare and pharmaceuticals. We expect a revival in the Indian markets, especially in small and medium-sized M&A and growth financing,” Krishan said.

He was answering a question on the changing mergers and acquisitions landscape in India.

Optimism around mergers and acquisitions is based on three key factors – the improving situation in financial markets indicates an increase in investor and CEO confidence; dealmaking has reached a turning point due to pent-up demand from buyers and growth in seller assets; and accelerating global megatrends have created a need for companies to reinvent their business models, which can be accelerated through mergers and acquisitions.

According to Krishan, sectors such as e-commerce, healthcare and biotechnology, renewable energy, electric vehicles and electric vehicle infrastructure, infrastructure, banking, financial services and insurance, IT services and technology (including artificial intelligence and semiconductors) have exciting prospects.

“In the future, we can expect a shift towards growth financing and a possible revival in venture capital. We are also seeing an increase in the number of transactions involving controlling stakes and an increase in the number of portfolio exits in the capital markets and in IPOs,” he said.

In line with the transformation trend, the same may also be seen in PE operating models – increased buyouts, platforms and subsidies, as well as a greater focus on sustainability and ESG integration,

he added.