3 weeks ago
India Inc Acquisitions Double, But One-Third Underperform
Indian companies are buying other companies much more often than they did in fiscal year 2017.
Crisil studied 600 large acquisitions across 20 sectors.
It also closely reviewed 100 deals that used significant debt.
About two out of every three of those deals broadly met expectations.
This means about one out of three did not deliver the results companies wanted.
A major reason for problems was difficulty combining the companies after the purchase.
Regulatory delays and challenges in completing international deals also caused trouble.
Still, many companies kept or improved their credit ratings and reduced their debt within two years.
India Inc’s acquisition volumes have more than doubled since fiscal year 2017, according to Crisil.
Crisil reviewed 600 acquisitions worth more than Rs 500 crore across 20 sectors.
One-third of 100 large debt-funded deals did not broadly meet expectations, while two-thirds did.
Integration challenges, regulatory delays and cross-border execution problems were identified as key risks.
About three-fourths of acquirers’ ratings were reaffirmed or upgraded, and 60% deleveraged within two years.
- Who
- India Inc companies, as assessed by Crisil, including 100 large debt-funded acquirers.
- What
- Acquisition volumes have more than doubled since FY17, while about one-third of large debt-funded deals did not broadly meet expectations.
- Where
- The analysis covers India Inc acquisitions across 20 sectors; inbound, infrastructure and financial-services transactions were excluded.
- When
- The findings were reported on Wednesday and cover deals since fiscal year 2017.
- Why
- Companies use acquisitions to accelerate growth, expand market access, acquire capabilities, and address technology, talent and intellectual-property gaps.
Key facts
- Deals analyzed
- 600 acquisitions worth more than Rs 500 crore each
- Sectors covered
- 20 sectors
- Outcome review
- 100 large debt-funded deals
- Deals meeting expectations
- Two-thirds broadly met expectations
- Key obstacles
- Integration challenges, regulatory delays and cross-border execution issues
- Credit outcomes
- Around three-fourths of ratings were reaffirmed or upgraded
- Deleveraging
- About 60% of acquirers deleveraged on or ahead of plan within two years
Quotes
Subodh Rai
Managing director of CRISIL
“A sound strategic rationale alone is not enough to ensure M&A (mergers and acquisitions) success. Value creation depends on disciplined integration, timely synergy capture and prudent leverage management.”
telegraphindia.com
“Our review of 100 large debt-funded deals shows two in three deals broadly met our expectations”
telegraphindia.com
Sources
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