Introduction
Indian companies can explore new market opportunities to grow and acquire assets overseas. Most of the Indian companies that look for new markets overseas are not focused on cultural or economic similarities, instead, they look for new opportunities that will help them acquire assets. The decision for overseas acquisitions is driven by the need for new markets and strategic asset acquisition.
In this coronavirus pandemic, Indian companies with strong balance sheets have managed to shake off the shock of the pandemic and pursue new market opportunities. This is done with the hope of acquiring attractive assets whose valuations have taken a massive hit from the coronavirus pandemic. At 7i Capital, an investment banking firm in India, we have been observing several Indian companies that are chasing overseas acquisitions.
The coronavirus crisis has not had uniform effects on all businesses. Some businesses have taken huge hits while others have remained unscathed, such as the technology sector, medical and packaged food industry.
Financial distress
The technology sector has seen an increase in demand for software services, such as cloud computing and cybersecurity. Various companies in the tech sector have acted swiftly and increased their portfolios through small acquisitions.
The financial distress in the global economy has created an interest in acquisitions and Indian companies can acquire assets for cheap. Businesses with strong balance sheets or those backed with private equity funds are in a better position to pursue overseas acquisitions.
The pandemic has presented numerous opportunities to acquire overseas assets or chase overseas companies whose valuations are in distress. However, Indian companies are not under pressure to acquire them. Also, few companies have the funds and confidence to go after certain acquisitions because of the delicate rebound of the global economy which can be halted due to the resurgence of coronavirus cases.
Attractive sectors
Certain sectors, which we could describe as attractive, such as pharma and chemicals are experiencing increased investor interest, and they could be looking to acquire assets and companies overseas. An acquisition that proves to be profitable and improves the marketability of a company can prompt the evaluation of a merger and acquisition. That’s what a strategic or financial investor is most interested in.
The technology sector has been seeing a lot of investor activity and acquisitions. Certain Indian companies such as HCL Technologies, Infosys, and Tech Mahindra have pursued and made overseas acquisitions. For example, HCL Technologies acquired DWS Ltd, an Australian-based IT solutions provider, for about $137 million.
Several companies are pursuing acquisition opportunities to increase assets and expand their market. Firms in the tech sector are cash-rich, and they are always pursuing overseas acquisitions to boost their portfolios.
Conclusion
Indian companies with impressive balance sheets can capitalize on the current financial distress facing numerous companies globally to acquire assets overseas. Not all companies have the funds and confidence to pursue overseas acquisitions, but those that find acquisitions that make business sense and expand their markets, should move swiftly and make the acquisitions. The tech sector is seeing a lot of activity, especially during this pandemic.