Enabling Collaborative Development – Indo-German Deals in a Decade

In this webinar, we share insights and comments from industry leaders on the growing Indo-German cross-border transactions. It talks about potential deal trends to look out for and reason for the growth of investments between the two nations.

How have the Indo-German M&A deals shaped?

“India and Germany's economic relations date back as far as 16 centuries, which is not known to many.” - Seema Bharadwaj | Director India, German Trade and InvestPartner

India truly has historical relations with Germany across trade and Foreign Direct Investment (FDI) that dates back to the post-second world war, where India was one of the first countries to establish diplomatic ties with Germany. Some key aspects of this relations include:

• 7th largest FDI investor with USD 12 billion invested in India for the last 20 years
• 25,000+ Indian students studying in Germany, second only to China
• India has USD 7.5 billion worth of FDI in Germany

Indo-German M&A deals space is also growing, with USD 4.5 billion worth of deal volume across 171 deals taking place between 2011 to 2020. Germany is a favorable nation for Indian businesses to enter the European market as the nation ranks third biggest European acquirer in India. Along with this:

• The highest number of deals or deal volume is linked with the strength of the states, with North Rhine-Westphalia leading with 11 deals with a deal value of USD 192 million for Germany. In India, Maharashtra leads with 40 deal volumes worth USD 1829 million.
• Materials in India and Automobiles in Germany are the top sectors
• Out of the 171 deals, the software and IT sector accounts for 31, followed by 29 in materials and 28 in capital goods

What is driving the Indo-German M&A transactions?

M&A deals, in general, have seen growth due to the following reasons:

• Stressed and non-core sale of assets
• The need to digitize and enter new markets
• Reduce go-to-market by adopting contract manufacturing and local R&D
• Decentralization of operations and supply chain activities

Dr. Christoph Eppinger, Partner, Ebner Stolz and Tanwir Shirolkar, Senior Director – Transaction Advisory Services, Nexdigm share various factors involved in these successful M&A transactions specific to Germany and India:

• Automobiles, software, pharmaceuticals, capital goods, and materials account are leading industries that are driving the M&A deals.
• Major use cases across these deals include product development, R&D, market penetration, growing customer base, etc.
• India’s large untapped consumer market, the skilled workforce at lower wages, manufacturing base for exports, local know-how and talent acquisitions have been key drivers.

Trends in 2021 and beyond:

As the global pandemic gripped the world, some effect of the same was seen in the transactions as follows:

• 51% of the M&A transactions were domestic or outbound by German companies for the first half of 2021. India saw a low quantum of inbound deals due to the second wave of COVID.
• GDP expected to grow to 5.2% in 2022 from -5.1% in 2020 for Germany, while 7% in 2022 from -8% in 2020 for India.
• A drop in savings ratio due to increased consumer spending for both nations
• The manufacturing and services sector is recovering for both nations
• Decrease in the exchange rate of Euros due to possible reduction in fiscal deficit
• Focus on electric mobility will driving investments and deals in the Indian automobile segment.
• India intends to grow its healthcare expense under the Ayushman Bharat scheme that provides an opportunity for the pharmaceutical sector’s growth.
• Availability of production linked incentive schemes announced by the government to encourage productions and exports in India.
• India is expected to become the 3rd largest consumer economy worth USD 4 trillion by 2025.
• Untapped Indian automobiles market, export and automotive design capabilities provide further growth opportunities for German companies.

The synergy of ecosystems for collaboration

“It's not only a partnership between Germany and India but also a relationship and partnership between India and Europe nowadays.” - Dr. Christoph Eppinger | Partner at Ebner Stolz

India and Germany provide complementary opportunities and support to each other via their ecosystems as follows:

• A low-wage, skilled workforce by India can complement the strong R&D infrastructure and incentives of Germany
• India’s growing startup ecosystem can complement German Mittlestand
• India’s growing consumption market can provide sales potential to Germany’s mature economy
• India’s incentives for FDI can complement Germany’s access to an organized market for industrial customers
• India is a key destination to outsource and decentralize operations, while Germany’s technology know-how can spearhead the same
• India is a good base to grow into the Asian market, while Germany is a go-to European market.

In the end, do listen to the panel discussion where experts share their experiences and opinions on the M&A deals they were involved in across India and Germany and the frameworks they use to ensure success.