M&A InteractiveSeptember 27, 2017 Indian Investments in EuropeThis article was originally published in the 25th September 2017 edition of A supportive environment, domestically and overseas, is imperative for M&As Although uncertainty on account of geopolitical issues around the world continues and despite slow progress on Brexit, the positive election results in the Netherlands, France and now Germany have kept European deal activity buoyant. This was evident in the value of European mergers and acquisitions (M&As), which were up by 30.1 per cent in the first six months of 2017. Inbound investments in Europe amounting to almost USD 211.1 billion have been announced till June, the highest year-to-date value since 2001 as per Mergermarket data. However, there was 65.7 per cent drop in the value of Chinese investments in Europe to USD 25.6 billion (59 deals), as compared to the same period last year (86 deals, USD 74.8 billion). Indian companies, on the other hand, displayed more appetite for deal making in Europe as compared to previous years. Indian investments in Europe have been on the rise on account of many factors including liberalisation of its overseas direct investment norms from time to time. Europe no doubt offers appealing investment opportunities for Indian companies now, as many of them are available at attractive valuations. Besides liberalisation in overseas investment norms, a strong growth rate in the domestic market has led to Indian companies actively scouting for overseas expansion. Restrictions on overseas investments imposed in 2013 were subsequently rolled back and limits were increased in 2014. Share swap was also allowed without any regulatory approval a couple of years ago. Further as recently as this April, the RBI also allowed Indian companies to merge with foreign firms subject to its approval and other requirements. But the question is whether Europe is ready to receive greater investments from India? In principle Indian companies mostly being family owned businesses may be a natural fit for their European counterparts given shared democratic values, commonality of philosophy and the complementary nature of offerings. However, the European M&A landscape throws many challenges for Indian firms. A few are as follows:
From Europe’s perspective, some of the solutions to the above challenges may require structural and political changes. On the other hand in the longer run, cultural adaptability of Indian firms coupled with rich intellectual capital will provide a competitive advantage to Indian buyers and European sellers. Consequently, a supportive and conducive environment both domestically and overseas is imperative for successful Indo-European M&As. DisclaimerThe contents of this hotline should not be construed as legal opinion. View detailed disclaimer. |
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