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Indian Technology Sector M&A in the First Half of 2024: Trends and Insights
Indian Technology Sector M&A in the First Half of 2024: Trends and Insights

September 27, 2024

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The first half of 2024 has brought notable changes to the Indian technology sector’s Mergers and Acquisitions (M&A) landscape. Despite a decline in the number of deals, there's been a pronounced shift towards high-value transactions. These strategic moves are focused on enhancing technological and operational capabilities, reflecting both a cautious approach to market conditions and an ambitious drive for growth, both domestically and internationally.

Chart title: Overall technology M&A Deal Volume and Average Transaction Value

 

Decline in Overall M&A Activity

 

  • M&A deal activity declined by 46% in the first half of 2024.
    • Political uncertainty, both within India and across global markets, has created an environment of caution, leading to longer decision making.
    • The ongoing global tensions, alongside macroeconomic uncertainties such as inflation and fluctuating interest rates, have exacerbated the slowdown.

 

  • Rise in High-Value Deals
  • In contrast to the sharp drop in overall deal volume, the average value of deals has surged, highlighting a clear shift in strategy among the Indian tech companies.
  • Companies have been focusing on fewer but larger deals, particularly aimed at strengthening technological and operational capabilities.
    • Notable examples include Infosys' acquisition of Insemi for USD 33 Mn, and Wipro's purchase of a 60% stake in Aggne Global Inc. and Aggne Global IT Services for USD 66 Mn.
    • This trend highlights India's robust economic growth, government efforts to advance digitalization, and the appeal of the Indian market for technology-focused businesses.

Share of M&A deal activity

Chart title: Share of Domestic, Outbound and Inbound in Overall technology M&A Deal Activity

 

  • Inbound M&A Sees a Boost

 

  • The share of inbound deals increased by 10%, showcasing heightened interest from foreign investors in Indian technology companies. The United States emerged as the most active acquirer, reflecting a keen interest in Indian innovations and tech talent.

 

  • Global investors which continue to advance in areas such as artificial intelligence, cloud computing, and software services. This trend is likely to continue, fuelling further foreign investments into Indian companies.

 

  • Outbound Deals: Cautious Expansion Abroad

 

  • Outbound deal activity also witnessed a modest increase of 3%. This growth, although slight, indicates that Indian firms are taking a cautious but deliberate approach to overseas expansion.
  • North America continues to be the most favoured destination for Indian tech companies looking to expand their footprints abroad, followed closely by the United Kingdom.

 

  • Domestic Deal Activity Slows

 

  • Domestic M&A in the first half of 2024 has contracted. The share of domestic deals dropped by 15%, signalling a slowdown in internal consolidation efforts.
  • The focus has shifted toward solidifying existing operations and expanding international.

 

Key M&A transactions (April-24 to June-24)

Key Reasons for M&A in H1CY24

  • A major driving force behind company acquisitions is the need to strengthen capabilities, which involves acquiring assets, technologies, or platforms. This accounts for a significant 61% of M&A activity.

 

  • Additionally, other key reasons include business expansion and geographic expansion, both of which closely follow as strategic goals for tech companies.

 

 

Geographic Focus: North America Leading the Charge

 

  • North America continues to be the top destination for outbound M&A activity from India’s tech sector. This trend is driven by several factors, including the strong demand for cutting-edge technology, innovation, and intellectual property.
  • Following North America, the United Kingdom has emerged as a favoured destination for outbound deals.

 

For more insightful updates and analyses on the latest trends in the technology sector, be sure to stay tuned to this space. I’ll continue to bring you the most relevant and timely information to keep you informed and ahead of the curve.

 

Source:

 - Venture intelligence


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Prajwal Pandey
Research Analyst

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