Landscape of Due Diligence in India

The evolving phase of the Indian economy presents an opportunity for significant improvements in its due diligence framework by reforming stringent anti-corruption laws, such as the Prevention of Corruption Act and the Benami Transactions Act.Such amendments have expanded accountability and diligence culture within the business. Incorporating criteria like Environmental, Social and Governance (ESG) into the due diligence process has encouraged sustainable business practices. Further,advanced technologies like AI have also contributed to streamlining the Due Diligence process, risk assessment and decision-making. Startups like DCirrus are thriving by implementing such technologies in their product, like VDRs, which improve the efficiency and effectiveness of Due Diligence and establish best practices.

The Indian regulatory body has witnessed significant developments by introducing bills like the Digital Data Protection Bill, 2022, which allows cross-border data transfers and embodies digital data embassies with “diplomatic immunity.” Digital Data Protection Bill emphasised the pivotal reforms in the IT Act of 2000, which affected social media, OTT platforms, and other digital media. Other drafts, like the Competition (Amendment) Act 2023, have significantly impacted M&A deals by introducing a ‘Deal Value threshold’, which implies penalties and remedies for technology companies. Other notable changes include the Insurance Laws (Amendment) Bill, 2022. 

Evolution of the Chinese M&A Landscape

In recent years, China has become a popular manufacturing destination. This has seen the remarkable rise of M&A with significant transformations, with the market expanding in size and activities from 2009 to 2016. With the value of deals exceeding about 1.8 trillion yuan in the market, the number of completed deals has increased from just 300 to more than 3,000, which added excellent value and aspiration in the M&A market of China. However, due to global uncertainties and regulatory measures, the Chinese market has seen a downfall of deals in 2020 by 700 starting from 2017. The Internet, real estate, finance and mechanical engineering sectors have witnessed extensive M&A activities. Despite the downfall, the market size remains larger than a decade ago.

Beijing and Shanghai are considered the business capitals of the Chinese market, and they’re predominant in the Chinese M&A landscape. Both inbound and outbound M&A transactions experienced growth before 2018 but significantly declined during the global COVID-19 pandemic. Outbound M&A has faced challenges from the US and European Markets owing to  market uncertainties and political reasons. Greater China stands at $18.7 billion in inbound M&A transactions with 294 domestic and inbound M&A deals, and outbound is valued at $10.7 billion with 53 outbound deals.

Recent Trends and Dynamics in M&A in the United States.

The revolutionary development of technology has been a significant player in M&A deals, and technology’s pivotal role has brought swift evolution in various business domains. The negotiation processes and government regulations that are part of these deals uplift the crucial role of financial advisors. The prominent investment banks issue various advisories on various deals. Meanwhile, legal firms with expertise in M&A intricacies navigate the process by employing leading legal advisors to oversee multiple transactions yearly.

Moving forward, there is a pivotal shift in the trajectory of M&A activity, centred on corporate adaptability to shifting economic conditions; the M&A transaction has seen significant growth in Special Purpose Acquisition Companies (SPACs) and Private Investment in Public Equities (PIPEs). Recent surveys have depicted the pivotal role of such creative deal types in U.S. corporates and equity firms.

Recent Trends in M&A Across the UK

The UK’s M&A market witnessed significant fluctuations during the third quarter of 2023 (July to September), accounting for 362 M&A transactions, including a decline of 117 transactions compared to the previous quarter. In M&A transactions, inward transactions, where UK-based entities have acquired, accounted for a total of £5.4 billion. However, the report suggests a lower performance in all other quarters, but post-2020, it indicates fluctuating but resilient foreign interest in British companies. On the other hand, the outbound M&A transaction, acquiring foreign entities, has demonstrated a positive trajectory, accounting for £2.2 billion. This highlights the UK company’s ambitions for global expansion despite the downfall of transactions.

Conclusion:

The dynamics of M&A across India and globally always reflect the complexities associated with the modern business environment, but integrating innovative and advanced technologies like AI can resolve these complexities and help businesses navigate a scarce environment efficiently. In India, the improving economic ecosystem is leading to the formulation of significant introductions and amendments to bills and laws. Parallelly, the M&A in China, the US, and the UK have experienced significant changes due to regional dynamics.