THE BLOG

India's Merger Merry-Go-Round

06/30/2015 05:06 pm ET | Updated Jun 29, 2016

In February, Indian IT services corporation Infosys paid $200 million to acquire Panaya, a California-based company that provides agile enterprise resource planning (ERP) by using automation technology. Just two months later, Infosys also bought digital e-commerce services provider Kallidus based in Gloucestershire, UK, for $120 million. Infosys CEO Vishal Sikka has an ambitious goal of exceeding $1.5 billion in revenue from total acquisitions by 2020.

Infosys is not the only Indian company growing inorganically. 2014 saw the highest number of Indian mergers and acquisitions transactions in a decade - 1,177 deals valued at $50 billion. This resurgence applies to pharmaceuticals, finances, telecommunications, and more.

Back in The Outback

Australia's pharma market is expected to reach $32 billion in less than five years. Not surprisingly, Strides Arcolab purchased the Australian generics pharmaceutical business of South African Aspen Pharmaceuticals in May. Less than a month later, Indian drug firm Dr. Reddy's Laboratories acquired a number of brands from Belgian firm UCB. Dr. Reddy's was particularly keen to bolster its dermatology, respiratory, and pediatrics portfolios.

On the financial side, Kotak Mahindra Bank Ltd. merged with ING Vysya - the Indian arm of Holland's ING Bank in June. Kotak Mahindra, headquartered in Mumbai, is India's fourth largest private bank. Both will explore cross-border prospects cooperatively.

Japanese Traction

India's automotive market is growing fast, but is quite different from western markets. One major player, Mahindra and Mahindra Ltd, which makes cars as well as tractors, is buying a third of Japan's Mitsubishi Agricultural Machinery Co. Ltd for $25 million. Mitsubishi Agriculture, which is a subsidiary of Mitsubishi Heavy Industries Ltd, makes tractors, harvesters, and transplanters. Mahindra is the world's largest tractor maker by volume (but not by revenue) and has a strong presence in the American south.

Technology and telecom are favorite sectors for buying and selling companies. mGage, a global intelligent mobile engagement provider with headquarters in Atlanta, Georgia, acquired Bangalore-based Unicel Technologies in May. 15 year old mGage services 800 enterprises. Internet and social media behemoths such as Yahoo! are always searching for tech startups - at the end of 2014, Yahoo! acquired Bookpad. Bookpad was a cloud document startup, which raises questions about whether or not Yahoo is planning to create its own document software.

Money in Missed Calls

Twitter of San Francisco might have challenges on Wall Street of late, but not in India. It acquired ZipDial, which was started by California-born Valerie Wagoner who moved to India and became fascinated by its "missed-call" culture: a caller would let their friend's cellphone ring once or twice and then hang up, as means of free communication. Using this system, ZipDial provides companies a method to market coupons, contests, and subscriptions.

Why, exactly, is India suddenly seeing such an influx in mergers and acquisitions activity? One significant factor is favorable government policies - for example, the Companies Act of 2013 provides a simpler and fast-tracked process for mergers and acquisitions. Other reasons include a fairly stable economy, strong capital flow, and foreign investment and interest. Globalization has led to a more interconnected world, so many Indian companies are on the lookout for opportunities to grow and expand in foreign markets, and vice versa.

What the Future Holds

However, according to the KPMG 2015 M&A Survey Report, only 4% of those surveyed said that India was the most attractive region for mergers and acquisitions deals, so the nation still has a ways to go in terms of international presence. I expect the 2016 report to rank India much more highly. Consumer goods, medical devices, healthcare, pharmaceuticals, media, technology, energy and infrastructure are some of the sectors where I predict increased activity in the next twelve months.