The rating agency Crisil has said that the overall acquisitions by India Inc have doubled since FY17. It also highlighted variety of reasons behind corporates opting for acquisition including accelerating growth, expanding market access and acquiring capabilities. Crisil’s analysis spans 600 deals of over Rs 500 crore each across 20 sectors. It excludes transactions in the financial services and infrastructure sectors and also inbound deals and ones led by private equity funds.
It highlighted that sectors like pharma and healthcare, enterprise technology, artificial intelligence and consumer businesses are using acquisitions to bridge technology, talent and intellectual-property gaps. In contrast, sectors such as cement and metals are using acquisitions to consolidate and reduce build times from four to six years to one to three years. Meanwhile, Crisil has assessed 100 large debt-funded deals from an outcome perspective and found out that two in three deals broadly yielded desired outcomes. It also noted that integration challenges are among the top issues afflicting deals, while other issues include regulatory delays and cross-border execution issues.
It noted that a sound strategic rationale alone is not sufficient to ensure M&A (mergers and acquisitions) success. It emphasized that value creation depends on disciplined integration, timely synergy capture and prudent leverage management. It added that companies that executed integrations effectively were better positioned not only to realise the benefits of acquisitions but also to manage and contain credit risk. It also noted that acquisitions have largely translated into stable or positive credit outcomes, with around three-fourths of ratings reaffirmed or upgraded following acquisitions. It added that around 60% of acquirers deleveraged on or ahead of plan within two years.
