Open offers highest since 2008 as acquisition, takeover attempts surge

Open offers this calendar year, following attempts at acquisition and takeover, came in at more than two a week. 

There were 121 such open offers to acquire additional shares following a substantial acquisition or change of control, shows the data compiled by primedatabase.com. 

This is the highest in 17 years and the second-highest since 1997 (the data is available since that year). The previous high was in 2008, which saw 133 open offers. 

In terms of value, the offer — of ₹41,443.95 crore this year — is the third-highest on record, with 2013 (₹47,473.77 crore) and 2022 (45,649.39 crore) being the only other two years with higher numbers. 

Takeover provisions are triggered when certain conditions are met. This broadly includes entities acquiring more than a 5 per cent stake in a company in a year, acquiring 25 per cent overall, or if there is a change in control in the company. 

Most open offers are for a minimum of an additional stake of 26 per cent and allow public shareholders an exit after the acquisition.

 

Exiting shareholders usually get a price related to the acquisition price or the volume-weighted price of the company’s shares over a period ranging from 60 days to 52 weeks, based on the circumstances around the acquisition. 

The largest open offers this year include Torrent Pharmaceuticals’ for JB Chemicals & Pharmaceuticals (₹6,842.80 crore), private-equity player CVC Capital’s Aquilo House’s for housing finance company Aavas Financiers (₹3,682.15 crore), and multinational IHH Healthcare’s acquisition of Fortis Healthcare (₹3,349.44 crore). 

“Mergers and acquisitions pick up when the economy is doing well,” said Pranav Haldea, managing director, Prime Database. 

Private-equity firms are more active than they were a few years ago and are looking for controlling stakes, which may be driving some of the acquisitions, Haldea added. 

This is happening at a time when there is a generational transition taking place in many businesses. 

When the next generation is not interested in the family business, promoters often look for other options such as selling out to another company in the same sector or to private-equity investors, he said. 

Private-equity transactions in November touched their highest level since 2022, according to Grant Thornton Bharat’s Dealtracker. 

There was a record number of mergers and acquisitions (99) with a shift being towards strategic, lower-value deals, according to the Grant Thornton report.

 

Profitable private-equity investment in India in the next era requires operational changes and deep involvement, which can largely happen only with majority or control stakes, noted Sumat Chopra, partner, Kearney, and head, private equity and merger and acquisition practice.

 

A lot of promoters who have seen their business grow significantly in the past few years are willing to bring in private-equity investors who can professionalise and scale up the business. This is driving a surge in transactions, initially led by technology firms and those in financial services, though this may change.   

 

“I expect the industrials and manufacturing sectors to see a big uptick,” said Chopra, adding that health care, consumer and renewable energy were also likely to see increased acquisitions in the time to come.

 

The average acquired amount as a share of the offer amount was 91 per cent in 2008. It is 31 per cent this year so far.  It can take many months for the open offer to be completed, which may also affect the final acquired amount. For example, a company that enters an open offer in October may not immediately be able to deploy the offer amount.

 

A pricing mismatch where shareholders were expecting a higher price than has been decided upon for the open offer could also be a reason for lower acquired amounts, according to Haldea.