A merger and acquisition deal is the avenue businesses explore to achieve radical growth and news related to such deals have become an essential part of Indian economy. There is no doubt that India is on the path of growth as far as the M&A deals are concerned, but there are a few driving factors underlying this growth. While inorganic growth is a top priority and the efforts of the government to enhance the ease of doing business in this country are a couple of reasons, there are other factors as well. The following are some of the reasons for the growth of mergers and acquisitions in India.
- The implementation of attractive schemes of development such as the disinvestment scheme.
- Flexibility and relaxation in the rules of Foreign Direct Investment policy to facilitate the ease of doing business in this country.
- Cost-effective housing schemes developed by the Indian government.
- The presence of a simplified tax structure or inter-alia that comes through the amendments made to the Goods and Service Tax Act of 2017.
- The reform sin the IBC of 2016 allowing the Reserve Bank of India to clear bad debts through its announcement of the non-performing accounts of the big corporate firms.
- Providing the global as well as the Indian corporate firms the opportunity to access the stressed assets and acquire them through the resolution plans that are approved by the court.
Scenario in India
The GDP rate of India has been growing exponentially during the last five years and the overview of World Bank and its economic report suggests that the GDP of this country is likely to grow at a rate of 7% during the financial year 2019-2020. The segments that have witnessed maximum growth during the first quarter of 2019 in the context of the M&A deals are the FMCG, housing finance corporation, the mid-cap IT sectors, the digital payment services, the start-ups at that grow at home, health and biotech along with the automobile industry. The hostility that reflected in the takeover of Mindtree by L&T and the acquisition of 30% shareholding of NIIT Technologies by Baring Private Equity Asia highlight the focus of the foreign and the Indian investors in the mid-cap IT companies. Several such deals can be expected through 2019 to 2020. Quite naturally, the mergers and acquisitions law firms can make roaring business during this financial year.
Impact of general elections
Several pipeline deals are waiting to arrive just as the investors of India and the world. The fate of the general elections in India that took place in the month of May is also going to have an effect on the global and the Indian entities. While the apprehensions about the elections built on for a long time, the arrival of BJP can also bring in certain changes in the nature of the deals in view of the policies of the new government. As far as the effect of these changes are concerned, a lot is still to be seen in the framework of M&A deals in India.
Consequences of geopolitical developments
Despite the changes in the political front, the geopolitical developments around the world, especially the trade war between the United States and China may make India one of the favored destinations as far as inbound investments are concerned. However, the other geopolitical pressures mounting around the globe such as the crisis in Iran and the soaring prices of oil, eventually resulting in instability in the exchange rate, the downfall in the global fiscal conditions along with the uncertainties surrounding the implementation of Brexit and its implementation may pose a threat to the M&A deals in 2019 globally.
Global appeal and sovereign interest
Ask the mergers and acquisitions lawyers and you will readily come to know that the private equity investors are constantly looking at India favorably during the last few years, and the year 2018 saw the entry of a few strategic players. In the year 2019, the PE investments can stay favorable and expected to rise.
Overviews of M&A deals in India
You can expect to see a huge influx of investment opportunities in India in the year 2019 as the driving factors leading to the enhanced investment in the final quarter of 2018 may continue to play a significant role when it comes to the future investments in this country. The inclination and the willingness of the investors to delve into the area of stressed assets available in the market is another factor to consider while viewing the scenario of the deals in this country. Along with this, the M&A law firms are going to cast an effect on the ways in which the deals are going to be worked around.
The trends in the Indian judiciary system giving a positive nod in the form of favorable judgments to the foreign investors has eased their entry into the world of commercial transactions and may consolidate the deals with the Indian companies.
Furthermore, the investment trends of 2019 predicts that the investors are going to stay keen about expanding their operations and diversify the business opportunities by investing in startups in the niche segments. Along with this, the shift of investments from the United States from China to India is going to create an array of benefits for the Indian companies doing business in the manufacturing sector. The top mergers and acquisitions law firms are also working their strategies for assisting the businesses to execute the deals. The role of investors is also going to differ and the prospects of strategic investments are also going to grow.
Author Bio
Amy Jones is a certified legal expert by profession and she is associated with Ahlawat & Associates- best law firms in India. She loves sharing useful information about business, finance and law with needy people. Follow her on twitter