Deal activity reached US$ 115 billion in 2021: PwC India

This marked an increase of 40% increase from 2020 in terms of value and 60% in terms of deal volume

February 25, 2022

Private equity contributed 57% by value and 61% by volume, amounting to US$ 66.1 billion across 1,258 deals

A record 43 start-ups achieved unicorn status in 2021 with approximately US$ 35 billion raised across more than 1,000 rounds

The technology sector saw 823 deals that amounted to US$ 40 billion –five times the deal value than in 2020

The strategic shift to digital, and innovative and disruptive business models will continue to drive M&As and increase private equity investments

The deal activity in India saw a record high in 2021, exceeding pre-COVID levels, and reached US$ 114.9 billion with 2,064 transactions. This marked an increase of 40% from 2020 in terms of value and 60% in terms of deal volume as per the PwC India report titled Deals in India: Annual Review and Outlook for 2022. Key factors for this growth can be attributed to abundant cash reserves, availability of private equity, increased foreign direct investment, and low-interest rates.

Private Equity and M&As leading the way

Private equity contributed 57% by value and 61% by volume, amounting to US$ 66.1 billion across 1,258 deals – 32% higher in volume and 50% higher in valuation compared to 2020. Mergers & acquisitions (M&As) contributed the remaining 43% by value and 39% by volume.

Private equity investments, which increased by over six times the corresponding value of 2020, saw strategic sales witnessing the highest activity as it accounted for 36% of the exit value in 2021. M&A megadeals in sectors such as renewables, infrastructure, and education reflect the sustained interest in consolidation. Economic optimism and the availability of abundant capital drove domestic M&As in 2021, with companies liquidating non-core assets to streamline activities and using the cash to buy assets.

Large deals in the renewable energy sector, such as Adani Green Energy’s US$ 3.5 billion acquisition of SB Energy India and Reliance New Energy Solar’s US$ 771 million acquisition of REC Solar Holdings, fuelled M&A activity.  

Start-ups continue to shine

The country also saw a record 43 start-ups achieving unicorn status in 2021 with approximately US$ 35 billion raised across more than 1,000 rounds. This was a threefold increase than that in 2020 and it was largely driven by FinTech, EdTech and Software-as-a-service (SaaS) firms.

The technology sector saw 823 deals that amounted to US$ 40 billion – approximately five times the deal value than that in 2020. This increase is primarily due to multiple five billion-dollar deals, which amounted to US$ 12.1 billion cumulatively. In addition, 78 mid-sized deals (investments in the range of US$ 100–1,000 million) amounting to US$ 19.4 billion, were made – a sharp increase from the 19 mid-sized deals in 2020. Wipro’s US$ 1.5 billion acquisition of Capco and Byju’s US$ 600 million and US$ 500 million acquisitions of Great Learning and Epic, respectively, were the major contributors to the IT sector’s expansion.

Despite the third wave of the pandemic, CEOs in India continue to remain optimistic about the economy maintaining an upward trajectory in 2022. An added focus on divestitures and portfolio restructuring for longer-term development, value creation, and profitability is also expected. Industry experts also anticipate unicorns will continue to acquire businesses, causing a wave of consolidation. In addition, it is expected that the strategic shift to digital, and innovative and disruptive business models will continue to drive M&As. Although the IPO market is predicted to slow down, private equity players are anticipated to continue investing in early-stage innovative companies.

PwC