Skilled labour, rising savings and domestic demand make countries like India the ideal emerging market for mergers, acquisitions and other transactions
TORONTO, June 23 /CNW/ - Merger and acquisition activity between Canada and India has grown significantly during the last five years, but we are still lagging behind the U.S. by a notable margin.
As the latest edition of the PricewaterhouseCoopers (PwC) Capital Markets Flash states, "India is arguably the world's most promising emerging market because of its structural strengths of a skilled young population, rising savings and investment rates, large unfilled domestic demand and globally competitive returns."
"While Canada was principally on the sidelines in the 2005-2007 cross-border M&A boom with India, there are a number of reasons why Canada should be front and centre in the next generation of cross border deal making," says Kristian Knibutat, national deals leader for PwC. These reasons include:
- A political commitment to resolve India's infrastructure crisis. This
is an opportunity for Canadian entities to form or expand
- A need to industrialize India's agrarian economy. This is an
opportunity for Canadians to act as consolidators of fragmented
- An immediate need for energy, resources and financial services to
meet emerged middle class demands. This will likely result in an
increase in M&A from India to the Canadian materials and energy
sectors as well as an increase in Canada-strategic partnerships in
the financial services sector
In the PwC report, Knibutat provides a retrospective on 2005-2010 deal activity and identifies a number of trends in India that point to a very positive investment climate. On its current growth trajectory, India's GDP will exceed that of the U.S. within only 42 years, the report states. Another PwC report released in April titled, "Emerging multinationals: The rise of new multinational companies from emerging economies," http://www.pwc.com/da_DK/dk/publikationer/assets/emerging-multinationals.pdf indicates that India is expected to produce the most new multinational companies over the next 15 years with over 2,200 Indian companies projected to open operations outside the country.
While IT still remains a highly targeted sector, year-to-date activity suggests that deal opportunities are now dispersed over a broader range of Indian industries. According to the PwC Capital Markets Flash Report, the following sectors posted a high volume of closed deals: consumer discretionary (17%), healthcare (11%), energy (6%), and materials (6%).
Transactions with India may be one of the most promising "new frontiers" for Canadian entrepreneurs and deal makers, says PwC. While a tremendous opportunity, cross border deals do have unique dimensions of complexity that must be appreciated.
PwC's Capital Markets Flash is produced every two weeks on featured topics from September to June. The latest 13-page report "Cross Border M&A - India," including 11 trending graphs and tables, is available on request. For more information and to subscribe to the bi-weekly capital market series go to http://www.pwc.com/ca/cmf
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