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Merger And Acquisition Activity In India: Meaning, Process & Types

Reports shared by GlobalData states that India is one of the fastest developing economies in the world and is expected to grow at a rate of 9.72% in the next few years as compared to other major economies like China ( expected growth-8.65%), France (expected growth- 6.23%), etc. India has become a hub of rapid foreign investments, owing to the emerging consumer market, and has given a big boost to the Merger & Acquisition business activity in the state. The M&A deal value in FY 2020 crossed a valuation of 21 billion USD. 

Mergers and acquisitions consulting firms in India have contributed greatly to the consolidation of business deals in the country and have helped foreign investors structure cross-border deals and secure their investment within the Indian market.

The section below will offer a thorough overview of the types and stages of M&A activity that the merger and acquisition consulting firms execute to secure business growth in various sectors.

Merger and Acquisition: Meaning and Difference

However, before learning about the types and stages, it is extremely crucial to understand what merger & acquisition mean.

Incorporate business world, the term merger and acquisition refers to the act of consolidating assets or shares of one firm by another through an elaborate financial and legal deal. However, though both the terms are often used interchangeably, there are some significant differences in their application.

Merger: Merger refers to the financial or legal transaction via which two firms combine their forces and form a single entity under a new corporate name.

Acquisition: Acquisition, on the other hand, is a business transaction in which one firm completely takes over the shares of another company such that it gains complete authority over it.

Merger and Acquisition: Types

Having learned about the differences, let’s now look into the types of Merger & Acquisition deal activity that governs cross-border deals in general.

Horizontal: When two companies that trade on the same products and services combine their forces, it is known as horizontal merging. A horizontal merger helps to reduce market competition as well as complementary share resources and skills.

Vertical: When two companies that belong to the same industry but have different supply chains come together, it is known as vertical merging. Vertical merger helps to improve operational activities and create better synergies.

Concentric: When two business firms have the same customer base but provide a different range of products and services is known as concentric merging. Concentric merger helps in product diversification and reduce investment risks. 

Conglomerate: When two firms that belong to two completely different industries combine, it is known as conglomerate merging. Conglomerate merging helps to improve the customer base, diversify the business, and facilitates cross-selling of products.

The reliable mergers and acquisitions consulting firms in India have been helping foreign firms in the strategic implementation of all the types mentioned above of M&A deal activity to secure sustainable growth. These consulting firms carry out detailed market research, identify a company’s respective business goals, structure deals and perform negotiations on their behalf.

Important Stages of Mergers And Acquisition Performed By Consultancy Firms 

Stage 1- Deal Preparation

Deal preparation is the most primary step of any M&A activity. It involves identification, shortlisting, and selection of a target firm. It also involves making a target profile to consider and check important factors like company size, financial position, customer base culture, profit, etc.

Stage 2- Structuring and Negotiation

This step involves performing a valuation of a target firm by a detailed SWOT analysis to formulate an adequate deal strategy and enter into negotiations as per the valuation models. A deal can be finalized if both the firms agree on similar terms.

Stage 3- Performing Due Diligence And Drafting Final Deal Agreement

Once a deal is finalized, the next step involves performing Due Diligence. All important documents, details, and reports will be rechecked to ensure there are no discrepancies in the information provided by the target firm. Following this, the final deal agreement is drafted with all regulatory approvals. 

Stage 4- Post Deal Integration

The final step is the post-deal integration process. The two firms combine their resources with detailed, financial, organizational, and structural planning monitored for several months. 

Merger and acquisition firms in India, like Tecnova, have been actively helping foreign investors to adequately execute all these stages with thorough India-specific strategies and reduce investment risks. From identifying targets to taking care of all regulatory needs, the highly experienced merger and acquisition professionals successfully assist numerous clients in consolidating their position in industries and improving their market share. 

Though India is creating promising opportunities for foreign investments, significant challenges are owing to the complex business structure, market fluctuation, dynamic consumer demands, and intricate legal requirements. Furthermore, almost 90% of Indian businesses are family-owned. 

To this end, acquiring fair deals and partnerships in the country requires significant analysis and careful execution. Such complex transactions prove extremely difficult without assistance from professional merger and acquisition experts. Therefore, the importance of merger and acquisition firms in India is being reinstated repeatedly and has become imperative to establish a strong foothold in Indian businesses. It helps to beat the ever-growing competition in the proliferating Indian market and ensure sustainability and profitability.

Author’s Bio:

Tecnova is one of the leading mergers and acquisitions firms in IndiaThe company has over 35 years of experience and a presence in over 15 international markets worldwide. With a detailed India-specific market entry strategy, Tecnova has helped numerous clients in framing and executing complex M&A deals to reduce investment risks and secure fair business opportunities.

Reference links:

https://www.globaldata.com/india-fastest-growing-among-major-economies-growth-rate-9-72-2021-says-globaldata/ 

https://www.ibef.org/news/ma-deal-activity-in-2020-jumps-33-pc-to-us-369-bn 

https://www.investopedia.com/terms/m/mergersandacquisitions.asp

 

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