BCG+2023年印度企业并购报告

2023IndiaM&AReport

BuildingDurableAdvantageinUncertainTimes

March2023

2023IndiaM&AReport2

BostonConsultingGrouppartnerswith

leadersinbusinessandsocietytotackletheir

mostimportantchallengesandcapturetheir

greatestopportunities.BCGwasthepioneer

inbusinessstrategywhenitwasfoundedin

1963.Today,weworkcloselywithclientsto

embraceatransformationalapproachaimed

atbenefitingallstakeholders—empowering

organizationstogrow,buildsustainable

competitiveadvantage,anddrivepositive

societalimpact.

Ourdiverse,globalteamsbringdeep

industryandfunctionalexpertiseanda

rangeofperspectivesthatquestionthe

statusquoandsparkchange.BCGdelivers

solutionsthroughleading-edgemanagement

consulting,technologyanddesign,and

corporateanddigitalventures.Weworkin

auniquelycollaborativemodelacrossthe

firmandthroughoutalllevelsoftheclient

organization,fueledbythegoalofhelpingour

clientsthriveandenablingthemtomakethe

worldabetterplace.

2023IndiaM&AReport4

Authors

KanchanSamtani

ManagingDirectorandSeniorPartner,

APACHead-TransactionsandIntegrationsPractice,

BCGMumbai

DhruvShah

Partner,

CoreMember-PrincipalInvestorsandPrivateEquityPractice,

BCGMumbai

AkshayKohli

ManagingDirectorandPartner,

IndiaHead-CorporateFinanceandStrategyPractice,

BCGMumbai

AshishBaid

KnowledgeExpert,

CoreMember-TransactionsandIntegrationsPractice,

BCGBengaluru

2023IndiaM&AReport5

ExecutiveSummary|DesignOption02|Page1/2

Executivesummary(I/II)

Aftertheglobalspikeinmergersandacquisitions(M&A)activityduringtheCOVID-19pandemicin2021whencompaniesinvestedforlong-termadvantage,2022sawareversiontopre-COVIDlevelsglobally.India,however,wasanexceptionandshowedcontinuedM&Aaccelerationthrough2022.

•Dealsweredrivennotonlybycompanieslookingtogrowtheircorebutalsobycapabilitybuilds,businessmodelextensions,andadjacencyplaystocementlong-termadvantage.

•M&Aactivitycoveredthefullspectrumofcompanies:fromnew-age"start-ups"inhyper-growthmodetolarger,established,andmorematurecorporates.

However,givenmacroeconomicuncertainty,thereissomedegreeofconservatismbeingobserved:acquirersappeartobetakingrelativelysmallerbets,translatingintoalowernumberoflargedealsbothgloballyaswellasinIndia.

Thoughglobalmacroeconomicfactors,suchasrisinginterestrates,willhaveanimpact,

M&AmomentuminIndiashouldbenefitfromsupply-sidebuild-up:corporatebalancesheetsarelushwithfreecashandsignificantdebtcapacity,whileprivateequity"drypowder"

isatelevatedlevels.

•Swiftcapitaldeploymentincomingquartersisimperativetodeliverreturnsforprivateandpublicmarketinvestors;M&Aisoneofthekeychannelsforcapitalallocationinthiscontext.

2023IndiaM&AReport6

Executivesummary(II/II)

Fromamarketperspective,afavorableenvironmentforbuyerstobeonthelookoutforqualitydealsasperiodsofrelativelyslowergrowthtypicallyfueldemandforattractiveassets:whilethestakesarehighto"getitright",thewidedispersioninfundamentalperformanceandvaluationssurfacesattractivepocketsofM&Aopportunity.

•Healthyassets(strongfundamentals,marketpositions,management)facing

near-termchallengesandtradingatmorereasonablevaluationspresentripeM&Atargets;however,itiscrucialtodisaggregatetemporarydislocationsfrombusinessmodellimitations.

"Green"investingisathematicM&AopportunitythatisincreasinglyseeingtractiongloballyaswellasinIndia:earlysignsofsuchdealsdemonstraterelativeoutperformancefromashareholdervaluecreationlens.

WhileM&Acanbeagrowthengineandpowerfulvaluecreationleverformostcompanies,especiallyintoday'smarketenvironment,strategic,financialandexecutiondisciplineandfocusarecriticaltounlockingnotonlystrongbutalsosustainablevaluefromdeals.

•Buyersmustproactivelybeonthelookoutfortargetswiththerightstrategicfit,buildrazor-sharpconvictioninthebusinesscaseandsetupbest-in-classintegrationcapabilitiestorealizethefullvaluepotential.

•Sellersmustunderstandtheneedsoftheirfutureinvestors,buildstrongproofpointstobuttresstheirequitynarrative,andplaninadvancetomitigateanyseparationchallenges.

2023IndiaM&AReport7

01

03

WhatYouNeedtoDo:

Call-to-ActionforCEOs,

CFOs,andBoards

Page27

WhereWeAreHeaded:ExpectedM&ATailwinds

WhereWeAre:

M&AActivityinIndiaToday

Page08

Page18

Tableofcontents

02

Section

WhereWeAre:

M&AActivityinIndiaToday

01

2023IndiaM&AReport8

2023IndiaM&AReport9

~40%

Global

GlobalM&Aactivityhasreverteddownwardtopre-COVIDlevels

DropinGlobalDealValuein2022Comparedto2021

DealValue($Bn)1

NumberofDeals(#)

8,000

6,000

4,000

2,000

0

40,906

31,909

35,397

-39%

4,279

3,928

3,137

3,088

2,609

2,8702,8742,951

2,582

1,802

40,000

30,000

20,000

10,000

0

2013201420152016201720182019202020212022

DealVolumeDealValue

Afteranexceptionallybusy2021,

M&Aactivityisrevertingto

long-termaveragelevelsdueto:

Toughermacroeconomicconditions:-geopoliticaltensions,supplychaindisruptionsandinflation.

Risinginterestrateenvironmentmakingdealfinancingmorechallengingthanbefore.

1.Dealvalueincludesassumedliabilities

Note:Thetotalof345,056M&Atransactionsgloballycomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2013,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.Source:Refinitiv;BCGanalysis

2023IndiaM&AReport10

51

996

879

673

+114%

111

96

52

3837

18

21

24

35

31

Evendiscountingforthelarge-ticketHDFCLtd-HDFCBankmerger,M&AdealvalueremainedsteadyinIndiabuoyedbyanincreaseindealvolume.

Indiancompaniesareleveraging

India

However,IndianM&Aactivityhasremainedvibrantasseeninthecontinuallygrowingdealvolumes

DealValue($Bn)1HighdealvolumedrivingNumberofDeals(#)2

activityinIndia

240

1,000

180

750

Excluding

HDFCMerger

120

500

60

250

0

0

2013201420152016201720182019202020212022

DealVolumeDealValue

thegoldenopportunityinthe

marketbydealhuntingand

buildingastrategicadvantage

throughinorganicgrowth.

1.Dealvalueincludesassumedliabilities2.DealsinvolvinganIndiantargetand/oracquirer.Thevaluefigurefor2022includesHDFCBank’sacquisitionofHousingDevelopmentFinanceCorp.for$60.4BnNote:Thetotalof7,726M&Atransactionscomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2013,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.Source:Refinitiv;BCGanalysis

2023IndiaM&AReport11

India

Post-pandemic-induceddip,2022sawcorporatespursuing

M&Aforgrowthandstrategicadvantage

NumberofDeals(#)

140

120

100

80

60

40

20

0

201720182019202020212022

COVID-19

2020

Averagemonthlydealvolume

reducedto48dealspermonth

duringCOVID,downfrom

70-75permonthpre-COVID.

80

68

2022

Median

58

Start-upM&Adealsincreased

in2022v/s2021,drivenby

corporatesinvestingingrowth

andcapability.

Mixofacquirersacrossstart-ups

aswellasscaledentities.

Note:Thetotalof5,041M&Atransactionscomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2017,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.

Source:Refinitiv;BCGanalysis

2023IndiaM&AReport12

CompaniesareinvestinginadjacenciestoexpandTAM(TargetAddressableMarket)whileleveragingsynergies,aswellasincapabilitiesthatboostthegrowthpotentialofthecorebusinessbyincreasingtheir

right-to-win.

India

Indiancompaniesusingacquisitionsasastrategictooltoenhancecapabilitiesandacceleratetheirplaytogrowthebusinessinthelong-term

SelectExamples

PersistentSystemsMediaAgility

PersistentSystems

acquireda100%stakein

MediaAgilityfor$71Mn

inMarch2022.

Rationale

Acquisitionexpands

PersistentSystems,ability

toexecutecloud-based

digitaltransformation;

MediaAgilityfocuses

onbuildingend-to-end

cloud-nativeengineering

capabilitieson

GoogleCloud.

CromptonGreavesButterfly

CromptonGreaves

acquiredan81%stakein

ButterflyGandhimathifor

$275MninFeb2022.

Rationale

Acquisitionstrengthens

CromptonGreaves,small

domesticappliances

business;Butterflyisatop

3pan-Indiakitchen

andsmalldomestic

appliancesplayer.

DaburBadshahMasala

DaburIndiaacquired51%

ofBadshahMasalafor

$71MninOct2022.

Rationale

Daburexpands

itspresence

inthebrandedspices

andseasonings

marketinIndia.

Zomato

Blinkit

ZomatoacquiredBlink

Commerce(Blinkit)for

$570Mninanall-stock

dealinJune2022.

Rationale

Enterquickcommerce

businessandexpand

addressableasgrocery

marketislargerthanthe

fooddeliverymarket.

Note:Thetotalof996M&AtransactionsinIndiacomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2022,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.

Source:Refinitiv;BCGanalysis

2023IndiaM&AReport13

ANNOUNCEDDATE

TARGET

ACQUIRER

2022|Mar2022|May2022|Dec2022|Dec

7,496

877

657

344

India

M&Aisnotrestrictedtolargecompanies:

usedasagrowthleveracrossthespectrumofcompanies

DEALVALUE($Mn)

CORPORATEDEALS(SelectExamples)

Larsen&Toubro

PVR

DalmiaGroup

RelianceRetail

Mindtree

INOX

JaypeeCement

Metro

START-UPDEALS(SelectExamples)

2022|Jun

2022|Jun

2022|Mar

2022|Mar

Lenskart

BigFootRetail

Perfios

BYJU'S

OWNDAYS

PickrrTech

Karza

IntapLabs

400

(RumoredValue)

200

79

10

Irrespectiveofyourcompany'scurrentscaleandmaturity,M&Apresentsanimportantopportunitytoaccelerategrowth,enternewbusinesslinesorbuildcapabilities.

Importanttoupfrontidentifythepotentialsizeofthetarget(s),theirfitforyourorganizationandportfolio,andtheiralignmentwithyourstrategicand

financialobjectives.

Note:Thetotalof996M&AtransactionsinIndiacomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2022,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.

Source:Refinitiv;BCGanalysis

2023IndiaM&AReport14

Jan'19

Feb'19

Mar'19

Apr'19

May'19

Jun'19

Jul'19

Aug'19

Sep'19

Oct'19

Nov'19

Dec'19

Jan'20

Feb'20

Mar'20

Apr'20

May'20

Jun'20

Jul'20

Aug'20

Sep'20

Oct'20

Nov'20

Dec'20

Jan'21

Feb'21

Mar'21

Apr'21

May'21

Jun'21

Jul'21

Aug'21

Sep'21

Oct'21

Nov'21

Dec'21

Jan'22

Feb'22

Mar'22

Apr'22

May'22

Jun'22

Jul'22

Aug'22

Sep'22

Oct'22

Nov'22

Dec'22

Global

Globally,largeM&Aappearstobenormalizingtohistoricallevels,suggestingadegreeofemergingconservatismfromacquirers...

Withconcernsofanimpendingslowdownandrationalizationofdealactivitytopre-COVIDlevels,investorsareexercisingmorecautionintakinglargebets.

NumberofLargeDeals($500Mn+inTransactionValue)

160

140

120

100

80

60

40

20

0

44

COVID-19AverageNumberofDeals

69

Pre-COVID-19AverageNumberofDeals

71

2022AverageNumberofDeals

118

Post-COVID-19AverageNumberofDeals

1

98

Median79

622

Non-PEDealsPEDeals

1.Quartile32.Quartile1

Source:Refinitiv;BCGTransactionCenter

2023IndiaM&AReport15

Jan'19

Feb'19

Mar'19

Apr'19

May'19

Jun'19

Jul'19

Aug'19

Sep'19

Oct'19

Nov'19

Dec'19

Jan'20

Feb'20

Mar'20

Apr'20

May'20

Jun'20

Jul'20

Aug'20

Sep'20

Oct'20

Nov'20

Dec'20

Jan'21

Feb'21

Mar'21

Apr'21

May'21

Jun'21

Jul'21

Aug'21

Sep'21

Oct'21

Nov'21

Dec'21

Jan'22

Feb'22

Mar'22

Apr'22

May'22

Jun'22

Jul'22

Aug'22

Sep'22

Oct'22

Nov'22

Dec'22

India

...withsimilarcautiousnessobservedinIndia

NumberofLargeDeals($100Mn+inTransactionValue)

12

9

6

3

0

6.0

Post-COVID-19AverageNumberofDeals

5.7

Pre-COVID-19AverageNumberofDeals

5.5

2022AverageNumberofDeals

3.7

COVID-19Average

NumberofDeals

1

7.3

Median5.5

2

3.0

Non-PEDealsPEDeals

1.Quartile32.Quartile1

Source:Refinitiv;BCGTransactionCenter

2023IndiaM&AReport16

Inthefaceofincreasingcostsofcapital,corporatemanagementteams,andinvestorsaresettingahigherbaroncapitalallocation:divestingunderperformingand/ornon-corebusinesseswheretheconfidencetoscaleprofitablyaspartofthegroupentityislower.Thishelpsreinvestcapitaltofuelgrowthinthecoreorganically,pursueacquisitions,andre-purposemanagementbandwidth.

India

Corporatedivestiturevalueandvolumeincreased

consistentlypostCOVID-19induceddecline

DealValue($Bn)1

NumberofDeals2

100

75

50

25

0

297

279

262

+25%

36

32

29

25

22

17

8

25

17

13

2013201420152016201720182019202020212022

DealVolumeDealValue

400

300

200

100

0

Imperativeforyoutotakea

de-averagedviewofyourbusiness,evaluateandclearlydefinestrategicobjectivesfornon-coreunits.

Timelydivestmentisapowerful

tooltoconservevalueand

"pruneforlong-termgrowth".

1.Dealvalueincludesassumedliabilities2.DealsinvolvinganIndiantargetand/oracquirer.Excludesdealswherethetargetparentandacquirerparentaresame

Note:Thetotalof2,588IndiaM&Adivestituretransactionsgloballycomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2013,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.

Source:Refinitiv;BCGanalysis

2023IndiaM&AReport17

ANNOUNCEDDATE

SELLER

DEALVALUE($Mn)

ACQUIRER

CORPORATEDEALS(SelectExamples)

India

Divestituresoflargeassetsdrivenby

long-termstrategicandfinancialconsiderations

TARGET

Holcim

Viatris

Citigroup

Jaypee

Group

PanaceaBiotec

EssarPower

AmbujaCements

Viatris

(BiosimilarsBusiness)

Citigroup

(ConsumerBanking)

Jaiprakash

(Cement)

PanaceaBiotec

(DomesticAssets)

EssarPowerTransmission

AdaniEnterprises

Biocon

AxisBank

DalmiaBharat

Mankind

AdaniTransmission

6,228

3,335

2022|May

1,629

657

249

247

2022|Feb

2022|Mar

2022|Dec

2022|Feb

2022|Jun

Debtreductionisoneofthebiggestreasonsfordivestmente.g.

•JaypeeGroup'sexitfromthecementbusiness.

•PanaceaBiotec'ssaleofitsdomesticformulationbrandportfolioalignedwithitsplantobedebt-free.

DivestmentsbyMNCsaredrivenbyspecificstrategicportfolioconsiderationse.g.

•Citibank'sexitfromIndiaretailbusinessgivenitshighcompetitiveintensityanditsinabilitytocapturemarketshare.

•Holcim'sdivestmentofAmbujaCementisinlinewithitsglobalobjectiveofsustainability.

Note:Thetotalof297IndiaM&Adivestituretransactionsgloballycomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2022,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.

Source:Refinitiv;BCGanalysis

02

WhereWeAreHeaded:ExpectedM&ATailwinds

Section

2023IndiaM&AReport18

2023IndiaM&AReport19

Attractive

Supply-sidebuild-up,

underscoredbyinvestor

cautiousnessintoday's

uncertainenvironment,

islikelytoboostM&A

activitygoingforward.

demand-sidepools

withfundamentally

healthyassets

facingtemporary

performance

pressurescoming

outofthepandemic.

Correctedvaluations

tomorereasonable

levelsseenin

pockets,presenting

anopportunistic

windowfor

prospectivebuyers

toexploreinorganic

strategicmoves.

"Green"investing

isathematicM&A

opportunitytoconsider

-increasinglyseeing

tractiongloballyas

wellasinIndia.

2023IndiaM&AReport19

2023IndiaM&AReport20

"DryPowder"($Bn)

15

India

IndianM&Aislikelytobenefitfromasupply-sidebuild-up

Cashbalanceshavebeenincreasing,

whileleverageratiosaredecreasing

AverageD/ERatio(x)Cash&CashEquivalents($Bn)

1.5

1.0

0.5

0.0

250

200

150

100

50

0

2010201120122013201420152016201720182019202020212022

Cash&CashEquivalentAverageD/ERatio

PE"DryPowder"(forfundsheadquarteredinIndia)hasreachedrecordlevelsin2022

+85%

13.3

10

8.1

7.2

6.8

6.7

6.6

6.7

5.8

5.1

5.0

4.9

4.9

4.2

5

0

2010201120122013201420152016201720182019202020212022

Note:Cashbalancesinclude"cashandcashequivalents"summedupacrossalllistedcompaniesinIndia;VenturefundsincludeallVCstages.Distressedincludesdistresseddebt,specialsituations,andturnarounds.DrypowderbasedonFundManagerlocation–fundswithlocationinIndiaareusedforcalculation;Drypowderrepresentscapitalavailabletofundmanagersforinvestment,i.e.,committedcapitalthathasnotyetbeen"called"forinvestment;~85%offundsinIndiahavenotdisclosedtheir"calledfunds%";forthesefunds,anindustryaverageof~95%isusedasabenchmark"calledfunds%",basisdiscussionwithdifferentsources.

Source:S&PCapitalIQ;Preqin;BCGanalysis

2023IndiaM&AReport21

Investors(%)

76%

74%

73%

73%

80%

75%

74%

72%

Global

Whileinvestorsentimentisconservative,mostbelievethatnowisthetimetoproactivelypursueportfolio-reshapingopportunitiesandbuildalong-termadvantage

Investorsareholdingontomorecashandvaluing

investmentsmoreconservatively…1

ChangesinCapitalAllocation

Housingmorecashanddrypowder

Investingmoreinsectorsandcompanieswith

longer-termstructuralgrowth&tailwinds

Investingmoreinsectorsandcompaniesthatare

benefitingfromthecurrentmacroenvironment

Investingmoreinsectorsandcompaniesthatare

abletopassoncostincreasesthroughpricing

Investors(%)

ChangesinInvestingPractices

Assumingahighercostofcapital

andadiscountrate

Valuinginvestmentsmoreconservatively(for

example,bygivingmoreweighttobearishscenarios)

Investingmoreonthebasisofvalueandlesson

thebasisofgrowthmomentum

Spendingmoretimeon

cashflowandbalancesheetconsideration

…howeverinvestorsaresupportiveoffinanciallyhealthycompaniesandactivelyreshapingtheirportfolios2

68%

investorsbelieveacquisitionsshould

beactivelypursuedtostrengthenthe

businessatcurrentvaluationlevels.

75%

investorsbelieveexitingordivestinglinesofbusinessesshouldbeconsideredtostrengthentheoverallcompanyinthecurrentmarketenvironment.

1.Howhaveyourcapitalallocationandinvestingpracticesorrecommendationschangedsincethebeginningoftheinflationaryandrecessionaryenvironment?2.Shouldcompaniesreshapetheirportfolio?Note:Allquestionswereposedwithrespecttofinanciallyhealthycompanies,whichweredefinedascompanieswithrelativelystrongandresilientfreecashflowandahealthybalancesheet.

Source:BCGInvestorPerspectivesSeries,Q12023,February22,2023;n=150

2023IndiaM&AReport22

BESTPERFORMINGCOMPANIES

14%

ShrinkingEBITMargin

ExpandingEBITMargin

28%

WORSTPERFORMINGCOMPANIES

Largedifferencesobservedbetweenbestandworst-performingcompanies(14pp2differenceinrevenuegrowthand7pp3differenceinEBITgrowth)inperiodsofslowergrowth.

Global

Performancegapsamongcompaniesgetsamplified

ina