India M&A Soars: Strategic Growth, New Rules.

Reaching a three-year high with US$29 billion in Q1, India's M&A landscape showcases strong domestic deals and a pivotal new regulatory environment.

Some battle-hardened executives are drawing from past crises to make bold, strategic moves despite high interest rates, regulatory hurdles, and AI disruption. 

M&A Midyear Report 2025 by bain and company - Read here

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India's mergers and acquisitions (M&A) market is currently experiencing dynamic and robust growth, driven by the country's rapid economic expansion, significant technological advancements, increasing foreign investments, and substantial regulatory reforms. For industrialists and business owners, understanding this evolving landscape is not just advantageous but crucial for identifying strategic growth opportunities and navigating potential challenges.

India's Booming M&A Market and Key Trends

The Indian M&A market has shown remarkable vigour, reaching a three-year high in deal value during the first quarter of calendar year (CY) 2025, with 669 transactions totalling US$29 billion. This indicates a strong investor confidence and a significant appetite for strategic investments. While domestic deals accounted for a substantial 72% of overall M&A volumes in Q1 CY 2025, cross-border M&A activity has also surged, with the US, UK, and UAE notably leading foreign investments into India.

Several sectors are driving this M&A momentum:

• Energy and Power has been particularly dominant, leading deal value in Q1 CY 2025 with US$7.3 billion.

  
  

• The Financial Sector and Media and Entertainment also saw significant deal values, at US$5.2 billion and US$4.5 billion respectively.

  
  

• Technology, especially in areas like Artificial Intelligence (AI) and deep-tech, continues to be a major focus, as companies seek to integrate advanced machine learning and automation capabilities.

  
  

• Other key sectors attracting M&A activity include Healthcare, Renewable Energy, Fintech, Real Estate, Blockchain and Crypto, and the emerging Space sector.

The Indian government has played a proactive role in fostering this growth through various supportive policies. These include:

• Issuance of shares with differential voting rights by SEBI to enhance control.

  
  

• Lucrative tax incentives and exemptions for registered start-ups.

  
  

• Introduction of corporate tax rate reductions.

  
  

• Increased foreign investments spurred by the Production-Linked Incentive (PLI) scheme.

  
  

• Elevated privatisation efforts encouraging multi-national companies to engage in takeovers or mergers with Indian firms.

  
  

• The Self-Reliant India Movement (Atma Nirbhar Bharat) has also bolstered foreign investments, particularly in the manufacturing sector.

  
  

• Allowance of 100% Foreign Direct Investment (FDI) under the automatic route in various sectors, including coal, mineral, defence production, and civil aviation, further accelerates M&A activity.

Looking ahead, the M&A deal value in India is projected to grow significantly, from an estimated US$110 billion in 2024 to between US$130 billion and US$160 billion in 2025. A key factor supporting this outlook is the Reserve Bank of India (RBI)'s policy repo rate, which was lowered to 6.25% in February 2025 and is expected to drop further, potentially reducing borrowing costs and supporting leveraged deals.

Navigating India's Evolving Regulatory Landscape

A significant development for any business contemplating M&A in India is the revolutionised merger control regulations that came into force on 10 September 2024. This introduces the Deal Value Threshold (DVT)under the Competition (Amendment) Act, 2023.

• Under the new rules, any M&A deal with a value exceeding INR 20 billion (approximately US$238 million) now requires mandatory approval from the Competition Commission of India (CCI), provided the target company has substantial business operations in India. This is particularly critical for the digital economy, where mergers may not involve large physical assets but hold substantial value in data or intellectual property, addressing a previous gap in regulatory oversight.

  
  

• The CCI will enforce these regulations with enhanced antitrust scrutiny, assessing potential anti-competitive collaborations, market dominance, and data privacy concerns.

  
  

• Non-compliance with mandatory notification requirements can result in substantial fines or other legal consequences, making it imperative for companies to understand and adhere to these new regulations.

M&A transactions in India are also governed by a comprehensive legal framework, including:

• The Companies Act, 2013.

  
  

• The Competition Act, 2002.

  
  

• The Foreign Exchange Management Act (FEMA), 1999.

  
  

• The Income Tax Act, 1961. Businesses must be prepared to obtain necessary clearances from regulatory bodies such as SEBI, RBI, and the CCI.

Impact of M&A on Corporate Performance and Strategic Rationale

Research on M&A outcomes in India reveals insightful trends for corporate performance:

A consistent finding is that mergers and acquisitions generally lead to a significant improvement in the valuation of the companies involved post-merger. This often reflects the synergy attained by the combined entities.

However, the impact on liquidity and profitability is often not significantly positive in the short term, and in some cases, these positions may even remain unaffected or decrease. This is frequently due to strategic motives beyond immediate profit maximisation. For example, as income increases from shared resources, operational costs may also rise, leading to no significant change in profitability ratios.

For business leaders, this highlights a critical point: the motive behind the M&A vastly affects the performance outcomes. Companies undertake M&A for a range of strategic imperatives, including:

• Expanding market share and fostering market growth.

  
  

• Achieving synergy and creating long-term value.

  
  

• Acquiring a global footprint and entering new geographical markets.

  
  

• Diversifying investments or eliminating competition.

  
  

• Gaining access to new, critical capabilities and talent, particularly in disruptive technologies like AI.

  
  

• Achieving scale economies in high-fixed-cost industries, which can lead to substantial cost synergies.

  
  

• Building future-proof portfolios through strategic acquisitions and, importantly, proactive divestitures of non-core businesses, even during economic downturns.

A key lesson from recent economic shocks is that companies that strategically leverage their strength to pursue M&A during periods of disruption often outperform those that remain static. This approach allows them to identify unique opportunities at potentially lower valuations and strengthen their balance sheets for long-term resilience.

Key Considerations and Challenges for Business Owners

While the opportunities are significant, successful M&A requires careful planning and execution. Business owners should focus on:

• Rigorous Due Diligence: A comprehensive review of the target company's financial health, legal standing, and operational status is essential to identify any potential risks or liabilities.

  
  

• Transparency and Disclosure: Full disclosure of any past issues or potential liabilities builds trust, helps ensure a smoother transition, and significantly reduces the likelihood of future litigation.

  
  

• Managing Conflicts of Interest: Proactive identification and management of any potential conflicts among parties involved are crucial for fair dealings and legal protection.

  
  

• Employee Welfare and Cultural Integration: Given that employees are the "lifeblood" of a firm, it is vital to address their pay rates and continued employment conditions. Merging corporate cultures can also pose challenges that impact workforce productivity and should be carefully planned.

  
  

• Addressing Valuation Disputes: Accurately determining the valuation of businesses, particularly for technology and start-up acquisitions, can be complex and requires expert assessment.

  
  

• Navigating Regulatory Hurdles: Adhering to the myriad of Indian laws and obtaining all necessary regulatory approvals is critical for transaction success.

  
  

Engaging expert M&A advisory firms can provide invaluable support throughout the process, from identifying and shortlisting firms to structuring deal strategies, conducting valuations, negotiating terms, applying for regulatory approvals, drafting legal documents, and assisting with post-acquisition integration.

Conclusion

India’s M&A market in 2025 is poised for continued growth, offering substantial opportunities for strategic expansion and value creation. For industrialists and business owners, success in this dynamic environment hinges on a deep understanding of the evolving market trends, the nuanced regulatory landscape, and a clear strategic rationale for M&A activities. By focusing on robust due diligence, ensuring compliance, and aligning M&A with long-term business objectives, companies can leverage these opportunities to enhance their market position and drive sustainable growth.