Record $82 billion dealmaking spree sees India defy global slump

Bankers in India posted their best-ever M&A quarter, while deal closings elsewhere are slowing.

India saw $82.3 billion pending and completed mergers and acquisitions in the second quarter, its highest amount ever, according to data collected by Bloomberg. That’s more than double the previous record $38.1 billion in Q3 2019. Global M&A volume reached $827.6 billion in the quarter, down 8.7% from the same quarter. period in 2021.

The rise in India was dominated by HDFC Bank Ltd.’s purchase of all shares of Housing Development Finance Corp. worth $60 billion in April, combining India’s most valuable bank and largest mortgage lender in the country’s largest-ever mergers and acquisitions. The move illustrated how India’s top companies, faced with disruptive trends such as the rise of fintech and climate change, are turning to dealmaking as a tactic to drastically reshape themselves.

Chart: Bloomberg

“As conglomerates will consolidate to become stronger and gain market share in their core industries, there will be renewed or new initiatives around two major themes: ESG and digital,” said Sonjoy Chatterjee, chairman and CEO of Goldman Sachs Group Inc. in india. The second in particular is a focus for all companies, regardless of industry, he added.

“There won’t be a strategy going forward that doesn’t provide a clear path to making it happen,” Chatterjee said.

The combination of Mindtree Ltd. and Larsen & Toubro Infotech Ltd., two software companies controlled by engineering conglomerate Larsen & Toubro Ltd., in a $3.3 billion all-share deal announced in May, further illustrated how India’s largest companies are positioning themselves for a changed landscape in technology, aided by the volatility in the markets.

Even without the HDFC mega deal, India’s second quarter would still be its sixth best quarter on record, thanks to deals such as billionaire Gautam Adani’s $10.5 billion deal to Ambuja Cements Ltd. purchase, giving his conglomerate a significant presence in the industry.

“Interest from strategic investors has certainly increased as the market correction has re-adjusted valuations in India,” said Ganeshan Murugaiyan, Head of Corporate Coverage & Advisory at BNP Paribas SA in India.

Companies in India that led the switch to renewable energy were among the biggest deal makers. Shell Plc agreed to buy renewable energy supplier Sprng Energy Pvt in April for $1.5 billion, while French oil giant TotalEnergies SE bought a 25% stake in Adani New Industries Ltd this month. bought. The company plans to invest more than $50 billion in technologies such as green hydrogen over the next decade.

Major acquisitions will be challenging to put together, Murugaiyan said. “It’s not that easy to get long-term financing and the high-yield leverage buyout market — corporate loans — is literally shutting down.”

Like Chatterjee, Murugaiyan sees that the green and digital transitions are driving more transactions. His team has grown from nine bankers in 2021 to twelve this year, and he is looking to add three more.

The next wave of deals could come in the mid-market, where a cohort of aging founders are beginning to hand over the reins to their offspring.

“We regularly find that the next generation has interests in other areas, especially technology platforms and ESG,” Chatterjee said. “Themes emerging from the pandemic have redefined perspectives and choices about what the next generation wants to do with their future — in a very personal way.”

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