Though India’s merger and acquisition activities are witnessing rapid growth and have achieved a 33% YoY increase as of the year 2020, it is faced with several challenges. In India, almost 90% of the business is family-owned, the legal structure is extremely intricate, consumer demand is dynamic, and there is immense competition in almost every industrial sector. Undertaking an investment without proper insight into such an intricate business framework proves extremely precarious for foreign firms. Therefore, the demands for a global business consulting firm in India are significantly increasing in recent times.
Here is how Indian consultancy firms are helping foreign organizations in the execution of M&A activity and consolidation of business across various industries in the country.
- Choosing the Best Corporate Transaction As Per Goals
The terms merger and acquisition are often used as synonyms; however, in the world of corporate finance, both have distinct meanings as per their application:
- Merger: When two companies join their forces to become a new corporate entity, it is known as a merger.
- Acquisition: When a respective business entity completely takes over another company or purchases maximum of its share and gains complete authority over it, the transaction is known as acquisition.
While investing in India, it is crucial to first identify the type of corporate transaction an organization must undertake. Indian consultancy firms critically understand the respective business goals, carry out thorough market analysis, and accordingly help foreign organizations choose the best corporate transaction to achieve their individual business ends.
- Identifying the Best Type of M&A Activity As Per Business Interest
M&A activities are divided into 4 broad categories as per their implementation and outcomes. These are:
- Horizontal M&A- Horizontal M&A occurs between two firms that have the same customer base and supply chain. This type of M&A reduces market competition and improves the production capacity.
- Vertical M&A – Vertical M&A takes place between two firms that belong to the same industry but have different supply chains. This M&A type helps to become more vertically integrated, reduce production costs and improve operational activities.
- Concentric M&A – Concentric M&A occurs between firms that have the same customer base but trade in different products and services: Concentric M&A largely helps in diversifying the product range and significantly reduces investment risk.
- Conglomerate M&A- Conglomerate M&A takes place between two companies that belong to distinct industries and have a separate customer base. Conglomerate M&A greatly enhances market share, improves synergies, broadens the customer base, and diversifies the business.
After co-relating respective business interests and current market competition, a reliable global business consulting firm in India helps foreign firms identify the best type of M&A activity for themselves. Foreign firms can thus reduce investment risks and achieve long-term profitability.
- Formulation of Strategy and Execution of M&A Stages
Indian consultancy firms, like Tecnova, also offer end-to-end assistance in executing all the crucial stages of M&A activity with professional understanding and skills. These involve:
- Identifying target firms
- Target profiling with detailed SWOT analysis.
- Preparing deals and undertaking negotiations
- Performing Due Diligence
- Securing regulatory approvals
- Assisting in final legal agreements
- Managing and monitoring the post-acquisition integration process.
Without professional assistance and adequate India-specific strategies, structuring and implementing the stages of merger and acquisition activities in the Indian market is overcome with severe risk. Therefore, foreign organizations are increasingly collaborating with business consulting firms in India to get proper insights into the business opportunities in respective sectors and secure fair and profitable partnerships that will generate appropriate returns on their investments.
