British companies are this year set to reclaim top spot as the acquirer of Indian businesses but many are missing out on takeover opportunities, says a report.
Businesses have spent a record £6.5bn on Indian acquisitions in the six months to June 30, far surpassing last year’s fifth-place total of £166m, when the US topped the table.
Indian companies are not to be outdone and have spent £605m acquiring British companies this year, more than three times the amount spent on businesses in any other country.
Strong historical ties India combined with India’s huge economic growth have underscored the substantial rise in UK-Indian deals.
But the report’s author, Anuj Chande, the head of Grant Thornton’s South Asia Group, sounded a note of caution, warning that mid-market companies had failed to make the most of business deals in India.
“The numbers are strong but based largely on a few mega deals. It seems particularly mid-market corporates have not made the most of the potential this rapidly growing market offers,” he said. “As anyone who has visited India for business recently will attest, the opportunities for investment and M&A are almost unlimited.”
Vodafone’s £5.7bn acquisition of Essar from Hutchison Telecommunications, completed in May, was by far the largest UK-Indian deal covered by the study. The remaining £800m of UK acquisitions on the subcontinent are accounted for by just three deals. “It would be good to see smaller companies following in the wake of these large acquisitions but so far this has failed to materialise,” said David Brooks, head of M&A at Grant Thornton Corporate Finance.
More than £7bn worth of Indian companies have been acquired by international buyers so far this year, with the financial and consumer products sectors the most popular, and technology companies close behind.
Natalie Evans, the head of policy at the British Chambers of Commerce, said: “For many medium-sized firms the thought of travelling halfway round the world to invest in a market they know little about can be very daunting. The opportunities on offer in India mean it is worth overcoming the hesitancy and taking the plunge.”
Mr Brooks said business and financial advisory companies must do a better job of educating businesses about the opportunities and risks of investing in India.
A total of £605m has been spent by Indian companies acquiring British businesses, up from £178m last year, when 15 were snapped up. In contrast Indian companies have spent just £169m on US businesses so far this year.
Tata Steel’s £5.75bn takeover of Corus, the Anglo-Dutch steelmaker, was omitted from the study on a technicality.