M&A deal value in India declines 27% to $136 billion in 2023: Deloitte

M&A deal value in India fell 27 per cent in 2023 to USD 136 billion but the deals market is expected to remain steady in the current year, Deloitte India said in a report on Monday.

"Amidst significant global challenges posed by high-interest rates, macroeconomic uncertainty, regulatory scrutiny, and geopolitical risks, India's M&A landscape stood resilient in 2023," 'India M&A Trends 2024' report said.

"Despite global economic and geopolitical challenges, India's deals market is expected to remain steady, reflecting strong confidence from businesses and investors amidst a global economic slowdown," it added.

In 2024, M&A (Merger and Acquisition) momentum is expected to remain steady with the manufacturing sector, driven by automotive, with deal growth expected in auto-components and Electric Vehicles (EVs).

Also, the government's proactive initiatives to promote clean energy are expected to catalyse a significant rise in M&A within the energy sector.

M&A in the financial services sector is anticipated to be driven by large-scale consolidations and responses to regulatory shifts. Private Equity (PE) is projected to remain consistent in 2024, while deal momentum is expected to revive post-2024, supported by flattening interest rates and recovering economic growth.

Sumeet Salwan, Partner, Consulting, Deloitte India, said, "The global challenges posed by high interest rates, macroeconomic uncertainty, and geopolitical risks, that characterised 2023 are expected to continue into 2024 as well. While the global M&A market remains soft, Indian companies continue to be steered by a strong domestic economy. They may increasingly see M&A as a crucial strategy to help them expand, integrate supply chains, and reinforce market positions."

According to the report, M&A deal value in India reduced to USD 136 billion in 2023 from USD 186 billion in 2022. Financial services, technology, media, and telecom (TMT) continue to be the top sectors driving M&A.

Financial services sector witnessed a 45 per cent decline in deal value and a 23 per cent increase in deal volume from 2022.

TMT sector encountered a 33 per cent YoY (Year on Year) reduction in deal value, while deal volume fell 34 per cent. Overall cross-border deal value declined 11 per cent in 2023.

However, inbound deals saw significant growth, with their share increasing to 41 per cent from 27 per cent in 2022, it said, adding that outbound M&A deal value experienced a notable 49 per cent decline compared to 2022.

The energy sector saw a sharp 63 per cent increase in deal value in 2023 as compared to 2022, driven by renewable energy and rising interest in clean energy from foreign investors.

The construction and transport sector witnessed a 44 per cent decline in deal value compared to 2022. The sector also had the highest share in outbound deal value, contributing 29 per cent to the same.

The medical and pharma sector witnessed a 17 per cent fall in deal value from 2022, driven largely by strategic buyers seeking to expand scale.

The industrial and manufacturing sector witnessed a significant 33 per cent and 22 per cent rise in deal value and volume, respectively, in 2023 compared to 2022.

"The rise in the manufacturing sector was driven by the automotive segment," the report said.