Under the enforced sessions of lockdown led by COVID-19, the overall M&A in India faced a fall from 461 deals (from the year 2019) to a count of 382 deals (in 2020). However, with adequate government support and reformed legal policies, adequate developments are getting noticed in 2021. The Government of India is emphasizing attain M&A to help SMEs and large organization gain coalesce to resources for better performance efficiencies and market advantages in the global scenario.
The concept of Merger and Acquisition in India gathered momentum from the late 1990 and presently has emerged as an endurance strategy for many large and small corporations. More and more companies are finding M&A as the key instrument for maintaining their profit margins and amplifying their competitiveness in the open market.
Horizontal M&A in India
This type of M&A involves organizations that deal with the same kind of products. The classic example of horizontal M&A in India is Amrit Agro Ltd and Frito Lay. Amrit Agro Ltd produced and marketed the famous Uncle Chipps which occupied almost 70% of the Indian potato chips market. Its M&A with Frito Lays in 1998 created the most dominant potato chips company in India. This M&A served two purposes - firstly it helped Frito Lays expand into the Indian market and secondly it added variants to the potato chips sector in India.
Vertical M&A in India
This involves companies that are part of the supply chain of a particular item or providing a particular service. The M&A of Flag Telecom by Reliance in 2003 is a Vertical Merger. Flag Telecom was involved with developing technologies and providing services in the telecommunication sectors and Reliance is the leading telecommunication service provider in India. In this M&A Reliance gained all the expertise of its target company, Flag Telecom, which helped Reliance to improve its technological know-how and improve its performance,
Conglomerate M&A in India
Here companies involved have no relationship in terms of markets, products and customer base. However, joining forces provides tremendous scope to increase the business size and introduce diversification for income sources. L&T combining its forces with Voltas is a good example of Conglomerate M&A in India. L&T is mainly into construction, infrastructure and cement while Voltas is a leading Air conditioner manufacturer and distributor.
Forward M&A in India
Can be also termed a direct merger where the company which has been targeted directly merges with the buyer. One such example is the M&A of Bank of Madura by ICICI. Here Bank of Madura was the target which finally merged with ICICI after the M&A in 2001.
Reverse M&A in India
Here the buyer merges with the target. It happens when a smaller entity takes over a larger company or a profit-making company merges with a loss-making organization. The merger of profit-making Godrej Soaps with loss incurring Gujarat Godrej Innovative Chemicals is a reverse M&A in India. This M&A created a larger profitable organization.
Cash M&A in India
In this M&A the shareholders of the original individual companies are offered cash for their share and they are not provided with any shares of the newly formed company. The acquisition of Jabong by Myntra in an all-cash deal is a Cash M&A in India. This acquisition gave an advantage to Myntra for competing with the bigger online companies.
With these trends, the M&A in India is looking forward to a better marketing scenario in FY 2021-22.