The M&A themes that may dominate in 2017

In 2016, the Indian government’s ban on high-denomination notes, the US presidential elections, the UK’s vote to exit the EU and the US Federal Reserve’s monetary stance occupied substantial boardroom bandwidth. Despite such economic and political headwinds the M&A landscape remained robust with India’s overall deal value reported to have reached a record high of US$52.6 billion.

It is difficult to predict with any certainty if these levels of consolidation will continue in 2017 as M&A activity depends on several macroeconomic and geo-political factors. However, some of the themes that may dominate the Indian M&A landscape in 2017 are as follows:

Private equity buyout

In the past couple of years, we have seen increasing instances of private equity funds buying controlling stakes in Indian companies. This trend is likely to continue as (a) promoters may continue to cede control or even fully exit from their existing ventures, especially the non-core ones, and (b) private equity funds are reported to have record levels of dry powder ready to deployed.

As per some estimates, funds’ liquid assets stand at roughly 35% of the total value of inbound deals announced last year. While the figures look attractive, in the absence of a robust domestic market for acquisition financing and with the US monetary policy tightening, private equity funds are likely to be selective with deals.