Next year likely to bring more clarity for M&A deals: Investec officials

Mergers and acquisitions (M&As) are likely to get a boost in 2025 on the back of increased political clarity after a year of key national elections globally and a cooling initial public offering (IPO) market, top executives at Investec Bank Plc said in an interview with the Mint.

“2024 was clearly a year of significant uncertainty. Uncertainty leads to a slowdown in M&A (mergers & acquisitions),” Charles Barlow, head of strategy execution for Investec Bank, said. Investec is dual-listed on the London Stock Exchange and the Johannesburg Stock Exchange and provides services such as investment banking, private credit financing and brokerage services, among others, in India and globally.

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“What we are hoping will happen is that now that we've had this year of all these elections across the US, in the UK, Germany, France, South Africa, and India over in 2024, going into 2025, regardless of the outcome of all these elections, at least globally, we’ll be in a better position to know where we stand, and M&A will start to flow,” Barlow said.

Specifically, in India, the tempering of the primary capital markets is likely to have a positive impact on M&A, said Vikram Surana, head, corporate finance and equity capital markets, Investec Capital Services (India).

“I think we are seeing some signs of a slowdown in terms of the IPO market. With the public markets cooling down a bit, the momentum will shift towards M&A and private sponsor activity,” Surana said.

In India, Investec also offers equity capital market services through a joint venture with SBI Capital Markets, a unit of State Bank of India.

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Annually, the Indian market has seen M&A and private equity activity remain range-bound at around $60-100 billion over the last several years. This is likely to continue, and private equity investments across manufacturing, capital goods, defence, packaging, chemicals, pharmaceuticals and IT (information technology) services will play out, Surana added.

Most private investors have seen the highest returns of 30-40% in internal rate of return from India over the last several years, prompting them to invest a lot more in India through large platforms, Surana said.

Indian companies are also showing more interest in outbound transactions through $100 million to $300 million tuck-in acquisitions, the executives said. If companies out of India are buying products or companies internationally, they like to see how those can be connected to India, Barlow said. In a tuck-in acquisition, a company merges a smaller acquired firm into one of its divisions.

For global investors, on the other hand, investing in India was a sure way to get access to a large market.

“If you invest in India, you get access to one-and-a-half billion people without having to invest in 20 countries,” Barlow added.

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In the last five years in India, Investec has executed 40-45 transactions, averaging 8-9 deals per year in the private markets. Together with SBI Caps, Investec has done $6 billion worth of transactions in the IPO markets and its private credits team has closed 65 transactions in the last 5 years and invested $6 billion into India through credit, Surana said.