India sees record M&A activity in calendar year 2022

Mergers and acquisitions activity stood at record levels in the calendar year 2022. Clearly, companies were looking to consolidate positions in a tough year even as other companies were trying to enter into new areas. There some of the largest big-ticket deal seen in segments like banking and cement during the year. Just look at the numbers. The total value of M&A deals in India for the year 2022 stood at a whopping $152 billion. This compares very favourably with a rather subdued figure of $107 billion that was recorded in 2021 in terms of the total value of mergers and acquisition deals. Clearly, most of the investment banks in India have been laughing all the way to the bank, driven by M&A activity.

The numbers show a sharp bounce from the COVID years. For instance, in the year 2018 the total value of M&A deals were $95 billion, which fell to $60 billion in 2019 and further to $20.76 billion in year 2020 amidst the rising tide of COVID cases. For the year 2022, domestic deals accounted for a lion’s share of the deals in M&A. For instance, nearly 72% of the deals by value were domestic deals while 52% of the deals by volume were also domestic deals. In terms of sectoral representation, technology and financial services accounted for over 30% of total deal value during the calendar year 2022. In terms of size of individual transactions, it was all about banking and cement, but more on that later.

It was not just about consolidation, but also about entry of large corporations into new areas. On the subject of consolidation, the biggest M&A deal in the year was the merger deal of HDFC Ltd into HDFC Bank. This is structured as a reverse merger since HDFC Ltd is the holding company that holds a major stake in HDFC Bank. However, in terms of asset size, HDFC Bank is much bigger and this allows the combined entity to retain the banking license. The merger is likely to create a conglomerate which would still be smaller than SBI in terms of asset size but would be the largest financial services player in the private sector by a huge margin. It would offer synergies on cost and on manpower deployment.

The other big deal was the $11.5 billion merger of Ambuja Cements and ACC Ltd into Adani group. Adani had first bought out the stake from Holcim group for over $10 billion and then made an open offer for the balance stake. Now, Adani group has acquired controlling stake in Ambuja Cement and ACC and now gets a total cement capacity of 70 MTPA. This makes the Adani group the second largest cement player in India after Ultratech Cements of the Birla group. This has triggered a series of consolidations in cement during the year.

The other big acquisition is by Bandhan Bank which will take over the asset management and the mutual funds origination business of IDFC First Bank. The year also saw HSBC MF taking over L&T Mutual Fund. OF course, the biggest deal in the year was the HDFC and HDFC Bank merger deal which was worth $40 billion. Other deals were much smaller. The other big deal was the aviation deal of Tata Sons taking over Air India for a total enterprise valuation of $8.9 billion during the year. The merger of Air India and Vistara will also create the second biggest airline and the details of the deal are yet to be put out. There was also the deal for the sale of Actis selling its renewable energy platform SPRNG to Shell for $1.6 billion. This was the largest such deal in the alternate energy space.

In the cement industry, it was not just the $11 billion ACC / Ambuja deal by Adani. There was also the Dalmia Cement deal to take over the clinker, cement and power assets of Jaiprakash Associates for an enterprise value of Rs5,666 crore. Going ahead, in the coming year, the action is likely to be focussed on sectors like auto components new tech segments such as IOT (Internet of Things), EV (electric vehicle) components, battery management, advance materials etc. Year 2023 also promises to be an exciting year for M&A in India.