A significant number of these are expected to be stock-led deals, distress sales and acquihires, they told ET. Bankers said deal talks that were in the offing three months back are now being accelerated.
Consolidation is high on the wish-list of venture capital investors as they look to ruthlessly trim portfolios at a time when even their own ability to raise money from Limited Partners has hit a roadblock.
“The pandemic is an unprecedented event. But it will be a catalyst for both VCs and entrepreneurs to think a little more openly and creatively,” said Karan Sharma, cohead – digital and technology, at Avendus Capital. “Some of these conversations, which could have happened two or three years down the line, could now potentially get accelerated and catalysed by the Covid-19 pandemic,” he added.
With investors clamping down on bridge capital rounds and urging portfolio companies to tighten their belts in order to extend their capital runways for at least 18 months, the volume of M&A transactions will go up, dealmakers said.
Entrepreneurs, particularly those running high cash-burn, consumer-facing businesses, are already being urged to look for potential opportunities to merge.
“There are twin forces at play right now. One is several companies will have (almost) zero revenue for the April-June quarter, while they still have costs that need to be covered. On the other side, fund raising will get delayed and take longer to complete. Therefore, you will see people say it makes more sense to combine – survive and grow, rather than compete for the same consumers and capital pools.” Gaurav Mehta, India Head of TMT-focused merchant bank, The Raine Group, pointed out. The consensus is that financial services, particularly those in the lending space, are prime targets for takeovers.
“Banks may feel like upping their tech stack and acquiring some assets from fintech, or even non-fintech de-funded NBFCs, because those are available right now at a discount,” said Anand Lunia, managing partner at early-stage VC firm India Quotient.
