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Mergers And Acquisition: The Consolidation Story

The initial hiatus of merger and acquisitions transactions during the early half of 2020 has peaked at its pace and 2021 will become the biggest year for global M&A activity. As per estimates worldwide, M&A deals could hit over $6 trillion. Corporates are all charged up as they see colossal economic revival and growth happening in Post Covid era. In fact, according to Refinitiv data, global mergers and acquisitions volumes had crossed $4.3 trillion in the first nine months of 2021, inching closer to an all-time high of $4.8 trillion set in 2015.

India was not far behind in terms of M&A deals this year. In fact, in the first nine months\’ deals valued at over $90 billion were struck. This marked an increase of 35.1% compared to a year-ago period. The deal count grew 10.1% year on year.

A Resurgence Of M&A Activity

The year 2021 would undoubtedly be remembered as the resurgence of M&A activity. Factors such as low-interest rates, fiscal stimulus by governments worldwide, easing of takeover rules, faster clearance of deals have led to sudden growth. Even Companies now believe that they would have to look beyond organic means to bolster growth. Thus, the push for acquiring companies. As has been the case in the past decade, the deals are now not restricted to only geographical boundaries of one\’s own country, but companies look worldwide to strike better deals and acquire assets. Indeed, according to the KPMG Survey conducted in September 2021, 86% of CEOs say inorganic means will be their primary source of growth in the coming years. The main impetus of organic growth would be mergers and acquisitions, joint ventures, strategic alliances, etc.

Startup World And Their Role In M&A Play

The year 2021 would also be remembered as the year for startups. Within the first nine months of 2021, India had 65 companies that turned unicorns, of which 28 turned unicorns in 2021. These companies have been bolstered by PE funding which has raised enormous funds. Thus, the startup\’s valuation is being raised north with each financing. We have also seen consolidation in these startups space in the last two years. Byju\’s acquiring WhiteHat Junior, Flipkart acquiring a majority stake in Cleartrip, Delhivery acquiring Saas startup Primaseller, and so on, the list continues.

The 18-month-old company WhiteHat Junior was valued at $300 million before M&A by Byju\’s, and now the current valuation is $590 million. Such is an impact of M&A.

Year 2022 And Beyond

With the year 2021 about to be drawn to close, it would be interesting to see how 2022 pans out in terms of M&A deals. One thing that is for sure is that M&A deals would stay for long as the industry keeps looking to consolidate itself.

 

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