BCG+2023年印度企业并购报告-36正式版

2023IndiaM&AReportBuildingDurableAdvantageinUncertainTimesMarch2023每日免费获取报告1、每日微信群内分享7+最新重磅报告；2、每日分享当日华尔街日报、金融时报；3、每周分享经济学人4、行研报告均为公开版，权利归原作者所有，起点财经仅分发做内部学习。扫一扫二维码关注公号回复：研究报告加入“起点财经”微信群。。2023IndiaM&AReport2BostonConsultingGrouppartnerswithleadersinbusinessandsocietytotackletheirmostimportantchallengesandcapturetheirgreatestopportunities.BCGwasthepioneerinbusinessstrategywhenitwasfoundedin1963.Today,weworkcloselywithclientstoembraceatransformationalapproachaimedatbenefitingallstakeholders—empoweringorganizationstogrow,buildsustainablecompetitiveadvantage,anddrivepositivesocietalimpact.Ourdiverse,globalteamsbringdeepindustryandfunctionalexpertiseandarangeofperspectivesthatquestionthestatusquoandsparkchange.BCGdeliverssolutionsthroughleading-edgemanagementconsulting,technologyanddesign,andcorporateanddigitalventures.Weworkinauniquelycollaborativemodelacrossthefirmandthroughoutalllevelsoftheclientorganization,fueledbythegoalofhelpingourclientsthriveandenablingthemtomaketheworldabetterplace.AuthorsKanchanSamtaniAkshayKohliManagingDirectorandSeniorPartner,APACHead-TransactionsandIntegrationsPractice,BCGMumbaiManagingDirectorandPartner,IndiaHead-CorporateFinanceandStrategyPractice,BCGMumbaiDhruvShahAshishBaidPartner,KnowledgeExpert,CoreMember-PrincipalInvestorsandPrivateEquityPractice,BCGMumbaiCoreMember-TransactionsandIntegrationsPractice,BCGBengaluru2023IndiaM&AReport4Executivesummary(I/II)Aꢀertheglobalspikeinmergersandacquisitions(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.•Swiꢀcapitaldeploymentincomingquartersisimperativetodeliverreturnsforprivateandpublicmarketinvestors;M&Aisoneofthekeychannelsforcapitalallocationinthiscontext.2023IndiaM&AReport5Executivesummary(II/II)Fromamarketperspective,afavorableenvironmentforbuyerstobeonthelookoutforqualitydealsasperiodsofrelativelyslowergrowthtypicallyfueldemandforattractiveassets:whilethestakesarehighto"getitright",thewidedispersioninfundamentalperformanceandvaluationssurfacesattractivepocketsofM&Aopportunity.•Healthyassets(strongfundamentals,marketpositions,management)facingnear-termchallengesandtradingatmorereasonablevaluationspresentripeM&Atargets;however,itiscrucialtodisaggregatetemporarydislocationsfrombusinessmodellimitations."Green"investingisathematicM&AopportunitythatisincreasinglyseeingtractiongloballyaswellasinIndia:earlysignsofsuchdealsdemonstraterelativeoutperformancefromashareholdervaluecreationlens.WhileM&Acanbeagrowthengineandpowerfulvaluecreationleverformostcompanies,especiallyintoday'smarketenvironment,strategic,financialandexecutiondisciplineandfocusarecriticaltounlockingnotonlystrongbutalsosustainablevaluefromdeals.•Buyersmustproactivelybeonthelookoutfortargetswiththerightstrategicfit,buildrazor-sharpconvictioninthebusinesscaseandsetupbest-in-classintegrationcapabilitiestorealizethefullvaluepotential.•Sellersmustunderstandtheneedsoftheirfutureinvestors,buildstrongproofpointstobuttresstheirequitynarrative,andplaninadvancetomitigateanyseparationchallenges.2023IndiaM&AReport6Tableofcontents010203WhereWeAre:M&AActivityinIndiaTodayWhereWeAreHeaded:ExpectedM&ATailwindsWhatYouNeedtoDo:Call-to-ActionforCEOs,CFOs,andBoardsPage08Page18Page27Section01WhereWeAre:M&AActivityinIndiaTodayGlobalGlobalM&Aactivityhasreverteddownwardtopre-COVIDlevels~40%DropinGlobalDealValuein2022Comparedto2021DealValue($Bn)1NumberofDeals(#)40,9068,00040,00030,00020,00010,0000Aꢀeranexceptionallybusy2021,M&Aactivityisrevertingtolong-termaveragelevelsdueto:35,3976,0004,00031,9092,582-39%4,279Toughermacroeconomicconditions:-geopoliticaltensions,supplychaindisruptionsandinflation.3,9283,1373,0882,8702,8742,9512,6091,80220132,0000Risinginterestrateenvironmentmakingdealfinancingmorechallengingthanbefore.201420152016201720182019202020212022DealVolumeDealValue1.DealvalueincludesassumedliabilitiesNote:Thetotalof345,056M&Atransactionsgloballycomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2013,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.Source:Refinitiv;BCGanalysis2023IndiaM&AReport9IndiaHowever,IndianM&AactivityhasremainedvibrantasseeninthecontinuallygrowingdealvolumesDealValue($Bn)1NumberofDeals(#)2HighdealvolumedrivingactivityinIndia2401,000996879Evendiscountingforthelarge-ticketHDFCLtd-HDFCBankmerger,M&AdealvalueremainedsteadyinIndiabuoyedbyanincreaseindealvolume.18012060750673+114%ExcludingHDFCMerger500111ꢂ6Indiancompaniesareleveragingthegoldenopportunityinthemarketbydealhuntingandbuildingastrategicadvantagethroughinorganicgrowth.250052353837312418215102013201420152016201720182019202020212022DealVolumeDealValue1.Dealvalueincludesassumedliabilities2.DealsinvolvinganIndiantargetand/oracquirer.Thevaluefigureforꢀ0ꢀꢀincludesHDFCBank’sacquisitionofHousingDevelopmentFinanceCorp.for$6ꢁ.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;BCGanalysis2023IndiaM&AReport10IndiaPost-pandemic-induceddip,2022sawcorporatespursuingM&AforgrowthandstrategicadvantageNumberofDeals(#)1402020120100806040200Averagemonthlydealvolumereducedto48dealspermonthduringCOVID,downfrom7ꢀ-7ꢁpermonthpre-COVID.80Median68202258Start-upM&Adealsincreasedin2022v/s2021,drivenbycorporatesinvestingingrowthandcapability.Mixofacquirersacrossstart-upsaswellasscaledentities.201720182019202020212022COVID-19Note: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;BCGanalysis2023IndiaM&AReport11IndiaIndiancompaniesusingacquisitionsasastrategictooltoenhancecapabilitiesandacceleratetheirplaytogrowthebusinessinthelong-termSelectExamplesCompaniesareinvestinginadjacenciestoZomatoBlinkitCromptonGreavesDaburPersistentSystemsMediaAgilityButterflyBadshahMasalaexpandTAM(TargetAddressableMarket)whileleveragingsynergies,aswellasincapabilitiesthatboostthegrowthpotentialofthecorebusinessbyincreasingtheirZomatoacquiredBlinkCommerce(Blinkit)for$570Mninanall-stockdealinJune2022.CromptonGreavesacquiredan81%stakeinButterflyGandhimathifor$275MninFeb2022.DaburIndiaacquired51%ofBadshahMasalafor$71MninOct2022.PersistentSystemsacquireda100%stakeinMediaAgilityfor$71MninMarch2022.RationaleRationaleRationaleRationaleEnterquickcommercebusinessandexpandaddressableasgrocerymarketislargerthanthefooddeliverymarket.AcquisitionstrengthensCromptonGreaves,smalldomesticappliancesbusiness;Butterflyisatop3pan-IndiakitchenDaburexpandsitspresenceinthebrandedspicesandseasoningsmarketinIndia.AcquisitionexpandsPersistentSystems,abilitytoexecutecloud-baseddigitaltransformation;MediaAgilityfocusesonbuildingend-to-endcloud-nativeengineeringcapabilitiesonright-to-win.andsmalldomesticappliancesplayer.GoogleCloud.Note:Thetotalof996M&AtransactionsinIndiacomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2022,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.Source:Refinitiv;BCGanalysis2023IndiaM&AReport12IndiaM&Aisnotrestrictedtolargecompanies:usedasagrowthleveracrossthespectrumofcompaniesANNOUNCEDDATEACQUIRERTARGETDEALVALUE($Mn)IrrespectiveofyourCORPORATEDEALS(SelectExamples)company'scurrentscaleandmaturity,M&Apresentsanimportantopportunitytoaccelerategrowth,enternewbusinesslinesorbuildcapabilities.2022|Mar2022|May2022|Dec2022|DecLarsen&ToubroPVRMindtreeINOX7,496877DalmiaGroupRelianceRetailJaypeeCementMetro657344Importanttoupfrontidentifythepotentialsizeofthetarget(s),theirfitforyourorganizationandportfolio,andtheiralignmentwithyourstrategicandSTART-UPDEALS(SelectExamples)2022|JunLenskartOWNDAYSꢂ00(RumoredValue)financialobjectives.2022|Jun2022|Mar2022|MarBigFootRetailPerfiosPickrrTechKarza200ꢀꢁBYJU'SIntapLabs10Note:Thetotalof996M&AtransactionsinIndiacomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2022,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.Source:Refinitiv;BCGanalysis2023IndiaM&AReport13GlobalGlobally,largeM&Aappearstobenormalizingtohistoricallevels,suggestingadegreeofemergingconservatismfromacquirers...NumberofLargeDeals($500Mn+inTransactionValue)Withconcernsofanimpendingslowdownandrationalizationofdealactivitytopre-COVIDlevels,investorsareexercisingmorecautionintakinglargebets.6ꢁ44ꢀꢀ87ꢀ16014012010080Pre-COVID-19AverageNumberofDealsCOVID-19AverageNumberofDealsPost-COVID-19AverageNumberofDeals2022AverageNumberofDealsꢂꢁ8Median7ꢁ26ꢃ6040200Non-PEDealsPEDeals1.Quartile32.Quartile1Source:Refinitiv;BCGTransactionCenter2023IndiaM&AReport14India...withsimilarcautiousnessobservedinIndiaNumberofLargeDeals($100Mn+inTransactionValue)5.73.76.ꢀ5.5129Pre-COVID-19AverageNumberofDealsCOVID-19AverageNumberofDealsPost-COVID-19AverageNumberofDeals2022AverageNumberofDealsꢃ7.36Median5.5ꢄ33.ꢀ0Non-PEDealsPEDeals1.Quartile32.Quartile1Source:Refinitiv;BCGTransactionCenter2023IndiaM&AReport15IndiaCorporatedivestiturevalueandvolumeincreasedconsistentlypostCOVID-19induceddeclineInthefaceofincreasingcostsofcapital,corporatemanagementteams,andinvestorsaresettingahigherbaroncapitalallocation:divestingunderperformingand/ornon-corebusinesseswheretheconfidencetoscaleprofitablyaspartofthegroupentityislower.Thishelpsreinvestcapitaltofuelgrowthinthecoreorganically,pursueacquisitions,andre-purposemanagementbandwidth.DealValue($Bn)1NumberofDeals21004002977550253002001000279ꢀꢅ2+2ꢄ%Imperativeforyoutotakeaꢂ632de-averagedviewofyourbusiness,evaluateandclearlydefinestrategicobjectivesfornon-coreunits.ꢀꢃꢀ5ꢀ5ꢀꢀꢁ7ꢁ7ꢁꢂ8Timelydivestmentisapowerfultooltoconservevalueand02013201420152016201720182019202020212022"pruneforlong-termgrowth".DealVolumeDealValue1.Dealvalueincludesassumedliabilities2.DealsinvolvinganIndiantargetand/oracquirer.ExcludesdealswherethetargetparentandacquirerparentaresameNote: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;BCGanalysis2023IndiaM&AReport16IndiaDivestituresoflargeassetsdrivenbylong-termstrategicandfinancialconsiderationsDebtreductionisoneofthebiggestreasonsfordivestmente.g.•JaypeeGroup'sexitfromthecementbusiness.ANNOUNCEDSELLERTARGETACQUIRERDEALVALUE($Mn)DATE•PanaceaBiotec'ssaleofitsdomesticformulationbrandportfolioalignedwithitsplantobedebt-free.CORPORATEDEALS(SelectExamples)2022|May2022|FebHolcimAmbujaCementsAdaniEnterprisesBiocon6,ꢀꢀ8ViatrisViatris3,335(BiosimilarsBusiness)DivestmentsbyMNCsaredrivenbyspecificstrategicportfolioconsiderationse.g.2022|Mar2022|Dec2022|Feb2022|JunCitigroupCitigroup(ConsumerBanking)AxisBankDalmiaBharatMankind1,629657•Citibank'sexitfromIndiaretailbusinessgivenitshighcompetitiveintensityanditsinabilitytocapturemarketshare.JaypeeGroupJaiprakash(Cement)•Holcim'sdivestmentofAmbujaCementisinlinewithitsglobalobjectiveofsustainability.PanaceaBiotecEssarPowerPanaceaBiotec(DomesticAssets)249EssarPowerTransmissionAdaniTransmission247Note:Thetotalof297IndiaM&Adivestituretransactionsgloballycomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary1,2022,andDecember31,2022,withnotransaction-sizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.Source:Refinitiv;BCGanalysis2023IndiaM&AReport17Section02WhereWeAreHeaded:ExpectedM&ATailwindsSupply-sidebuild-up,underscoredbyinvestorcautiousnessintoday'suncertainenvironment,islikelytoboostM&Aactivitygoingforward.AttractiveCorrectedvaluationstomorereasonablelevelsseeninpockets,presentinganopportunisticwindowfor"Green"investingisathematicM&Aopportunitytoconsider-increasinglyseeingtractiongloballyaswellasinIspectivebuyerstoexploreinorganicstrategicmoves.2023IndiaM&AReport19IndiaIndianM&Aislikelytobenefitfromasupply-sidebuild-upCashbalanceshavebeenincreasing,whileleverageratiosaredecreasingPE"DryPowder"(forfundsheadquarteredinIndia)hasreachedrecordlevelsin2022AverageD/ERatio(x)Cash&CashEquivalents($Bn)"DryPowder"($Bn)+ꢀꢁ%1.51.00.50.025020015010050151054.20020102011201220132014201520162017201820192020202120222010201120122013201420152016201720182019202020212022Cash&CashEquivalentAverageD/ERatioNote: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;BCGanalysis2023IndiaM&AReport20GlobalWhileinvestorsentimentisconservative,mostbelievethatnowisthetimetoproactivelypursueportfolio-reshapingopportunitiesandbuildalong-termadvantageInvestorsareholdingontomorecashandvaluinginvestmentsmoreconservatively…1…howeverinvestorsaresupportiveoffinanciallyhealthycompaniesandactivelyreshapingtheirportfolios2ChangesinCapitalAllocationInvestors(%)68%Housingmorecashanddrypowder76%74%investorsbelieveacquisitionsshouldbeactivelypursuedtostrengthenthebusinessatcurrentvaluationlevels.Investingmoreinsectorsandcompanieswithlonger-termstructuralgrowth&tailwindsInvestingmoreinsectorsandcompaniesthatarebenefitingfromthecurrentmacroenvironment73%73%InvestingmoreinsectorsandcompaniesthatareabletopassoncostincreasesthroughpricingChangesinInvestingPracticesInvestors(%)75%Assumingahighercostofcapital80%75%74%72%andadiscountrateinvestorsbelieveexitingordivestinglinesofbusinessesshouldbeconsideredtostrengthentheoverallcompanyinthecurrentmarketenvironment.Valuinginvestmentsmoreconservatively(forexample,bygivingmoreweighttobearishscenarios)InvestingmoreonthebasisofvalueandlessonthebasisofgrowthmomentumSpendingmoretimeoncashflowandbalancesheetconsideration1.Howhaveyourcapitalallocationandinvestingpracticesorrecommendationschangedsincethebeginningoftheinflationaryandrecessionaryenvironment?2.Shouldcompaniesreshapetheirportfolio?Note:Allquestionswereposedwithrespecttofinanciallyhealthycompanies,whichweredefinedascompanieswithrelativelystrongandresilientfreecashflowandahealthybalancesheet.Source:BCGInvestorPerspectivesSeries,Q12023,February22,2023;n=1502023IndiaM&AReport21GlobalPerformancegapsamongcompaniesgetsamplifiedinatoughereconomicenvironmentSalesGrowthandEBITMarginduringdownturnꢂIncreasingSalesGrowthBESTPERFORMINGCOMPANIESLargedifferencesobservedbetweenbestandworst-performingcompanies(14ppꢃdifferenceinrevenuegrowthand7pp3differenceinEBITgrowth)inperiodsofslowergrowth.ꢀ4%ꢀ4%Criticaltoidentifyfundamentallystrongcompaniesexperiencingtemporaryperformancepressuresduetomacro-economicfactors.ShrinkingEBITMarginExpandingEBITMarginBuildingamedium-to-long-terminvestmentthesiscanhelpdiscover"hiddengems".44%2ꢁ%WORSTPERFORMINGCOMPANIESFallingSalesGrowth1.AverageacrossthelastfourUSdownturnssince1985;basedonperformancecomparedwithathree-yearpre-downturnbaselineforUScompanieswithatleast$50millioninsales2.Annualizedrevenuegrowthduringthedownturn3.Comparedwiththethree-yearaveragepre-downturnEBITmarginSource:S&PCompustatandCapitalIQ;BCGHendersonInstitute2023IndiaM&AReport22IndiaLower-growtheconomyacquisitionspayoffinthemedium-termCumulativeRelativeTotalShareholderReturnIndex(RelativetoRebalancedMarketIndex)Lower-growtheconomydealsoutperformstrong-growth-economydealsbymorethan18%.105.0DealsOutperformingtheMarket103.0100.0100.5100100:IndexisRelativetotheDealPeriodThebenefitsareevenhigherfornon-coreacquisitions(outsidethebuyer'sindustry).+1ꢁ.69ꢂ.ꢁWhetheryouareanexperienceddealmakeroranoccasionalacquirer,slowergrowthperiodspresentagoldenopportunitytoinvestinattractiveassetsandextractsignificantvalue.ꢃꢄ.4T=DateofdealAnnouncementT–3T+3Year1Year2LowerGrowth-EconomyDealsStrongGrowth-EconomyDealsNote:Strong-economy,8.0%(lowgrowth-economy,5.7%)quartersaredefinedinwhichIndia'srealGDPgrowthrateisinthetop(bottom)thirdofallgrowthratesinourobservationperiod(January2000toSeptember2022).Thetotalof570M&Atransactionscomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedbetweenJanuary2000andSeptember2022withadealvaluegreaterthan$50M.Benchmarkindex=S&PBSESensexindexandNiꢀy50index(whereBSESensexwasnotavailableasabenchmark).Source:Refinitiv;BCGanalysis;BCGCaseExperience2023IndiaM&AReport23IndiaCurrentvaluationssuggestthereareattractivepocketsofopportunitytoidentifyandpursuereasonablypriceddealsDealvaluationsaretrackingatlong-termaverageTakeoverpremiumsaretrackingatanall-timelowMedianEV/EBITDAAcquisitionMultiple(x)MedianOne-WeekDealPremium(%)ꢀꢁꢀꢃꢄꢁꢄꢃꢁ13ꢂꢃꢀꢃꢄꢃꢃAverageꢄꢂ.ꢅAverage8.7-3ꢃ-ꢄꢃProspectivebuyersmustactquicklyanddecisivelyasthewindowforsourcingselectassetsatcorrectedvaluationsisshort.Asthelevelofeconomicuncertaintydecreases,valuationswilllikelyrebound.Righttimeforcorporatebuyerstoexplorestrategicdealsandplaceopportunisticbets,whichmayhavebeenheldbackforawhileduetohighlyinflatedvaluationsacrosstheboard.Note:Thetotalof493M&Atransactionscomprisescompleted,unconditional,andpendingdealsannouncedbetweenJanuary1,2005,andDecember31,2022,withnofilterontransactionvaluesandsharetransfers.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.Onlydealswithadiscloseddealvaluewereconsidered.Source:Refinitiv;BCGanalysis2023IndiaM&AReport24India"GreenDeals"areemergingasanattractiveinvestmenttheme;thetransitiontocleanenergyisthelargestdriverThevolumeandvalueofgreendealshasincreasedoverthepastdecadeswithasteeprisein2021ThetransitiontocleanenergyisthemaindriverofdealsDealValue($Bn)1NumberofDealsGreenDealsintheAcquirer’sIndustry(%)2765432105040302010050SubjecttoLimitedSampleSize403020100DealVolumeDealValueEnergy&UtilitiesMaterialsConsumerHealthcareIndustrialsTMTFinancials&RealEstate1.Dealvalueincludesassumedliabilities2.PercentageofalldealsintherespectiveindustryNote:Thetotalof466greenM&AtransactionsinIndiacomprisespending,partlycompleted,completed,unconditional,andwithdrawndealsannouncedfromJanuary1,2005,toDecember31,2021,withnotransactionsizethreshold.Self-tenders,recapitalizations,exchangeoffers,repurchases,privatizations,andspinoffswereexcluded.TMT=Technology,Media,andTelecommunications.Source:Refinitiv;BCGanalysis2023IndiaM&AReport25APAC"GreenDeals"createvaluebothintheshort-termandlong-termwhencomparedtoNon-GreenDealsCompanieswithafocusonsustainabilityareabletocreatevaluethroughmultiplelevers:CARꢀGreenvs.Non-Green(2001-2021)Two-YearRTSR2Greenvs.Non-Green(2001-2021)MedianCAR(%)MedianꢂYRTSR(%)Betterfinancingaccessandlowercostoffunds(highESGcompaniesenjoy0.5-0.ꢃ%lowercostofcapital).2.1x6.5xUpto10%highermarketvaluations(e.g.,investorsarewillingtopayapremiumforrenewableenergyassetsduetoenergytransitionconcerns).1.23ꢂ.6ꢁAvoidanceofcarbontaxesandotherregulatoryrisksbyloweringemissions.0.ꢁ7Operationalcostsavingsthroughdecarbonization-relatedefficiencygains.0.41ꢂ-3%revenueandvolumeupsidepotentialfromproductsmarketedasclimate-friendly.Non-GreenDealGreenDealNon-GreenDealGreenDeal1.CAR=cumulativeabnormalreturn2.RTSR=RelativeTotalShareholderReturnNote:Thetotalof164greenM&AtransactionsinAPACcomprisescompleted,unconditional,andpendingdealsannouncedfromJanuary1,2001,toDecember31,2021.Weincludedonlydealswithatransactionvalueofatleast$100million,asharetransferofatleast50%,andaratioofdealvaluetotheacquirer’senterprisevalueofgreaterthan5%.Self-tenders,recapitalizations,exchangeoffers,repurchases,acquisitionsofremaininginterest,minoritystakepurchases(upto49.9%),privatizations,andspinoffswereexcluded.Onlydealswithadisclosedvalueandreturncalculationswereconsidered.Source:Refinitiv;BCGanalysis2023IndiaM&AReport26Section03WhatYouNeedtoDo:Call-to-ActionforCEOs,CFOs,andBoardsGlobalUnlockingvaluefromM&Aisnon-trivial:MorethanhalfofM&AdealsdestroyvalueDriversofFailure[%ofdealsanalyzedreducingvalue3]However,whendoneright:46%STRATEGICFINANCIALEXECUTIONꢂꢃ%ꢂ2%ofdealsaddvalue130%21%18%11%ꢁxvaluewhensuccessful21.Basedonpublic-to-publictransactionsfrom1980to2018.ValuemeasuredasRelativeTotalShareholderReturn(RTSR)foroneyearaꢀertheannouncementdate2.Basedonpublic-to-publictransactionsfrom1980to2018.Measuredasone-yearRTSRfortop25%dealsthatgeneratepositiveRTSRcomparedtobottom25%dealsthatgeneratepositiveRTSR3.Morethanonereasonpossible;samplesize=277Source:Refinitiv;Datastream;BCGTransactionsandIntegrations2023IndiaM&AReport28India"First-time"acquirers-increasinginIndiainrecentyearsꢀatanevenhigherriskof"gettingitwrong"One-yearaverageRTSR1(%)5.3%"Serial"acquirersleveragetheirdealknow-howandintegrationexperiencetogeneratehigherrelativevalue.2.9Establishedcapabilitiestoconductthoroughdiligenceassessmentoftarget.Realistic