Merger and acquisition is the avenue that the companies explore to achieve linear and exponential growth and has continued to generate interest. When you consider the Indian perspective of the transaction deals, you will quickly realize how they have become an integral part of the Indian economy and the daily headlines bear testimony to this. According to the macroeconomic indicators, the country is slated to work on the trajectory of growth and the M&A deals are likely to continue in the future as well. Among the motivating factors that are going to push the deals through, the inorganic growth is at the top of the list especially because the efforts of the government could not do much to reduce the stagnant period of several projects that come under the grip of several regulations and compliance issues. Quite naturally, inorganic growth through these deals seems to be an attractive option.
However, some of the other motivating factors for the deals are:
The urge to reduce the independence and integration either backward or forward with investment in another function of the supply chain.
Due to reduced or compression in the area of sales, the businesses are available as cheap.
Understanding the key objectives
The primary goal of these deals is to expand the market share, diversify the market presence and to buy technology, and the mergers and acquisitions lawyers are working on the deals to prove their efficiency in the long run. Apart from this, the deals also act as a powerful tool for the companies to close the mismatches and the gaps such as the growth gap, market gap, gap in the outlook of growth between the partners and the business cycles, gap in succession planning, and the resource gap. For instance, the acquiring of an active pharmaceutical ingredient manufacturing company by a pharmaceutical company shows the effort to reduce the resource gap.
Similarly, the sale of the partner’s stake is an attempt to bridge the gap that is created due to the mismatch in the perspectives. For strategizing the M&A deals, companies are required to evaluate the present and the future gap. The economic development can create endless possibilities for these deals, but things are to be assessed carefully before moving on with the transaction deals. The mergers and acquisitions law firms are here to assess the situation for the parties involved in the deal and evade the pitfalls.
Looking at the deals closely
When you take a look at the deals in-depth, there are distinctive character traits and it is essential to find out whether they are driven by compulsion or opportunities. Some of the traits also reveal during the mid-market, cross-border and the distressed M&A’s. While the distressed and the cross-border deals are driven by compulsion, the mid-market deals are not only attractive, but are driven by targets and opportunities. The year 2019 being the year of the general elections, it is not going to corner the deals and you will find several M&A lawyers in India reviewing the prospects of the deal. Companies following this path focus on the long-term benefits and the political scenario is never going to undermine the decision. Quite naturally, the rural sector is likely to witness a better flow of cash for which funding from the corporate entities plays a vital role. The crisis of liquidity in the NBFC and the banking sectors can shift the focus to private equity.
Banking and automobile
The banking sector can also appoint M&A law firms due to the high prospects of the deals to materialize as the recent example of Vijaya Bank, Dena Bank, and Bank of Baroda shows. Due to the rising cost of servicing, consolidation is hard to avoid in the banking sector. At the same time, the transactions may also grow stronger in the automobile component industry as the sector is currently engrossed with consolidation due to the bigger players increasing the capacity of manufacturing.
You may also come across deals that are driven by technology when the automobile industry is gradually planning to switch to electronic vehicles. The bulk chemical sector may also come across these deals due to capacity expansion. The sub-sectors such as facility management service and the hospital management service may also witness a few of the players when you consider mergers and acquisitions in India and there may be more to come.
Some of the major motivating factors that can result in more deals are:
Several considerations such as the anti-trust regime are also compelling the companies to go for this option. As a matter of fact, this aspect has been a part of several transactions abroad, but is at its early stage in this country largely due to the size of the deals.
Selling the non-core assets
The rising levels of debt have also pushed several corporate entities to go for the sale option on their prized assets. For instance, Reliance Infrastructure selling the cement assets to Birla Corp is an example of this kind of deal. Quite naturally, the top mergers and acquisitions law firms have been the hotbed of activity due to the prospects of transactions across different industry verticals.
The final bet
The geopolitical developments occurring globally can also impact the M&A sector in this country. Moreover, the trade war between the US and China has also changed the equation between India and the rest of the world. However, the companies in the US can take advantage of this situation and is likely to take a look at India as a potential market for business growth creating an opportunity for the startup legal services to utilize the opportunity fully.