A business report tracking merger and acquisition (M&A) deals in the Indo-German trade corridor in the past decade, has revealed that 171 M&A deals valued at USD 4.5 billion took place in that period.
The report has further stated that Germany is also the third most active European acquirer of businesses in India, hence, solidifying its presence in both inbound and outbound acquisitions. The Nexdigm-Ebner Stolz report titled ‘Enabling Collaborative Development – Indo-German deals in a decade’ was released to commemorate 70 years of diplomatic relations between Germany and India.
Acquisitions from Indian companies in Germany
As per the report, Germany is the most popular M&A destination for Indian auto companies as the country is the global hub for auto innovation and the second-largest export market for Indian auto component manufacturers.
Indian investments in software companies have also been following an increasing trend. Given the rapidly evolving nature of the industry, cash-rich Indian IT companies have been making global acquisitions to enhance their technology portfolio and tap into experienced talent, along with expanding their customer base.
Speaking of these observations, Dr. Christoph Eppinger, Partner at Ebner Stolz, said, “While the UK has been the leading investment destination in Europe for Indian companies in the past, Brexit may propel Germany’s popularity as a foothold for Indian companies in the EU, as they need an alternative to consolidate and manage their EU operations.”
The report stated that 70 % of all acquisitions by Indian companies in Germany have been complete buyouts, on the back of a more organized and mature economy.
Acquisitions from German companies in India
German acquisitions in India are fueled by the country’s large captive consumption market and its positioning as a value-efficient base to cater to the world. With India’s improving R&D competencies, German companies are also viewing the country as an R&D hub. M&A trends emphasize the strengths of the two countries as sectors such as automotive, pharmaceuticals, and software, lead deal activity, highlighting the synergistic opportunities.
Considering the complex and distinct business environments of India and Germany, the corridor has been ripe with collaborations, with over 600 Indo-German joint ventures in India.
The report found that less than 30% of all acquisitions by German companies in India were complete buyouts, suggesting German companies’ preference to retain Indian promoters to counter challenges of operating in the subcontinent with their local know-how and on-ground management.
M&A trends post-pandemic
According to Tanwir Shirolkar, Senior Director at Nexdigm, “The transactional trend in the next few years is geared towards digitalization. E-health, ed-tech, and e-retail are among the sectors which have observed a flurry of deals in the past year and a half, and this interest is only expected to pique further.” The report suggests that post-pandemic, artificial intelligence, cloud adoption, data security, health-tech and green energy are some of the key areas that will drive deal activity.”
Further, with the increasing interests from mid-market companies on both sides, cross-border M&A, strategic collaborations, and technology tie-ups will be crucial to drive business growth and expansion in the Indo-German corridor. In addition to acquisitions and JVs, companies would also look to contract research and manufacturing arrangements.
The report may be accessed by clicking the link.