Indian bankers recorded their best quarter for mergers and acquisitions, while deals elsewhere are slowing.

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(Bloomberg) – Indian bankers recorded their best quarter for mergers and acquisitions, while deals elsewhere are slowing.

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India saw $82.3 billion in pending and closed M&A deals in the second quarter, the highest amount on record, according to data compiled by Bloomberg. This is more than double the previous record high of $38.1 billion in the third quarter of 2019. Globally, M&A volume in the quarter reached $827.6 billion, down from 8.7% compared to the same period in 2021.

The rise in India was led by the $60 billion purchase of Housing Development Finance Corp. by HDFC Bank Ltd. in April, combining India’s most valuable bank and largest mortgage lender in the country’s biggest-ever M&A deal. The move illustrated how India’s flagship companies, faced with disruptive trends such as the rise of fintech and climate change, are turning to trading as a tactic to radically reshape themselves.

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“As conglomerates consolidate to become stronger and gain market share in their core sectors, there will be renewed or new initiatives around two main themes: ESG and digital,” said Sonjoy Chatterjee, Chairman -Chief Executive Officer of Goldman Sachs Group Inc. in India. The second in particular concerns all companies, regardless of sector, he added.

“There won’t be a strategy going forward that doesn’t provide a clear path to get there,” Chatterjee said.

The combination of Mindtree Ltd. and Larsen & Toubro Infotech Ltd., two software companies controlled by engineering conglomerate Larsen & Toubro Ltd., in a $3.3 billion all-stock deal announced in May, further illustrated how India’s biggest companies are positioning themselves for a changing tech landscape, helped by market volatility.

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Even without the HDFC megadeal, India’s second quarter would still be its fifth-best quarter ever, thanks to deals such as billionaire Gautam Adani’s $10.5 billion deal to buy Ambuja Cements Ltd., giving his conglomerate a significant presence in the industry.

“Strategic investor appetite has definitely increased as the market correction resets valuations in India,” said Ganeshan Murugaiyan, head of corporate coverage and advisory at BNP Paribas SA in India.

Indian companies at the forefront of the renewable energy transition were among the key negotiators. Shell Plc agreed to buy renewable energy provider Sprng Energy Pvt for $1.5 billion in April, while French oil giant TotalEnergies SE bought a 25% stake in Adani New Industries Ltd. this month. The company plans to invest more than $50 billion in technologies such as green hydrogen over the next decade.

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Read more: Big Oil is betting green hydrogen is the future of energy

Big acquisitions will be difficult to put together, Murugaiyan said. “Getting long-term finance is not that easy and the market for high-yield leveraged buyout – corporate lending – is literally shut down.”

Like Chatterjee, Murugaiyan sees green and digital transitions driving more transactions. His team has grown from nine bankers in 2021 to 12 this year, and he is looking to add three more.

The next wave of deals could come in the middle market, where a cohort of aging founders are beginning to hand over the reins to their offspring.

“Regularly, we see the next generation moving into other themes, especially technology platforms and ESG,” Chatterjee said. “Themes emerging from the pandemic have revised perspectives and choices about what the next generation wants to do with their future – in a very personal way.”



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