Domestic consolidation, portfolio realignment to boost M&A transactions: EY

Merger and acquisition activity in India is expected to be steady as corporates focus on domestic consolidation and look for assets to combat competition and complement their services portfolio, says a report. According to EY's 18th Global Capital Confidence Barometer, domestic consolidation and portfolio realignment are expected to foster merger and acquisition transactions in the country.

Furthermore, corporates are expected to future-proof their businesses by divestment of non-core and disruption prone assets and this in turn will boost M&A activity.

"Deal activity in the country would continue to be dominated by domestic M&A as Indian corporates increasingly look out for consolidating their position in their respective industry segments by rolling-up assets available at the right valuations," said Ajay Arora, Partner and Leader, Lead Advisory, EY.

As per the survey, 66 per cent of the respondents said that they will buy and sell assets in next six months to reshape their portfolio for the future.

Arora further noted that corporate business houses divesting non-core businesses due to high leverage and IBC driven sales will act as a catalyst to further spur domestic deal activity.

Further, domestic market topped the preference list of the investors, followed by the US, Singapore and China, though a sense of caution prevails on the cross-border front.

The report, however, noted that increasing competition is expected to be a key dampener in the deal-making in the coming months. Notably, 64 per cent of the respondents mentioned that they have either failed to complete or cancelled a planned acquisition in the past 12 months.