Mergers and Acquisitions (M&A) Strategies and Valuation Techniques: A Complete Guide

Mergers and Acquisitions (M&A) is one of the most exciting activities taking place within the corporate finance industry. Such moves include mergers and acquisitions seeking growth, competitive advantage, new capabilities, and market positioning. Though mergers are often used to describe the joining of two companies to become one, an acquisition is one company purchasing another and taking control.

M&A transactions have been a driving force for change around the world, in sectors from tech and healthcare to financial services and manufacturing, through the ages. Companies pursue M&A strategies for various reasons—some seek economies of scale, others aim to expand geographically or diversify their product lines.

In the fast-changing world of modern business, where technology and globalisation is the focus, M&A has also grown more complicated and data-centric. Understanding the foundations of M&A, along with the strategic rationale and financial implications, is crucial for business leaders, investors, and professionals navigating the corporate landscape in 2025 and beyond.

Key Drivers of M&A Activity in 2025 –

India’s Mergers and Acquisitions landscape in 2025 is experiencing strong momentum, driven by a convergence of economic, technological, and policy dynamics. With Indian businesses looking to consolidate market leadership and improve operations, strategic M&A are increasingly being identified as powerful levers for the same.

• Economic Recovery and Market Consolidation: The Indian growth story is refusing to be dampened by global disturbances with companies continuing with their mission to consolidate fragmented industries through Mergers and Acquisitions to access greater scale both domestically and overseas.
• Digital Transformation and Tech-Driven Acquisitions: Technology continues to be a primary catalyst for M&A deals, especially in sectors like fintech, edtech, healthtech, and enterprise SaaS. Startups and established players alike are being acquired to accelerate digital innovation and enhance product offerings.
• Regulatory Reforms and Government Initiatives: Favorable government initiatives, simplified business procedures, and relaxed FDI regulations are propelling the cross-border and domestic M&A mainly in the manufacturing, pharmaceutical and defense industry.
• Private Equity and Venture Capital Influence: An increase in private equity and venture capital funding is fuelling acquisition activity. PE firms are investing and facilitating strategic exits through M&A deals, thereby boosting transaction volumes.
• Strategic Expansion into Rural and Tier 2/3 Markets: Companies are increasingly acquiring local or regional players to grow to under penetrated markets in India. This is true especially of industries like FMCG, telecom and healthcare.
• Competitive Pressures and Globalization: Factors such as increased competition locally, and the ambition to enter global footprints are driving the Indian companies to actively consider inorganic growth so that they remain ahead in the race vis-à-vis competition and acquire new customer pools.

• Horizontal Mergers: A combination of businesses at the same supply chain level and in the same industry. Consolidating market share, lowering competition, and achieving economies of scale are the primary goals.
• Vertical Mergers: A combination of businesses in the same industry that operate at several supply chain levels. Improving operating efficiency, protecting supply sources, or managing distribution routes are the primary goals.
• Conglomerate Mergers: A combination of businesses from different industries. Diversifying business risks and entering new markets are the primary goals.
• Market-Extension Mergers: Mergers of businesses that sell comparable goods in many marketplaces. The primary goal is to increase the consumer base and geographic reach.
• Product-Extension Mergers: Mergers of businesses in the same market that provide complementary goods. Enhancing product portfolios and cross-selling to current clients are the primary goals.
• Hostile Acquisitions: An acquisition where the target company does not consent to the deal. The main aim is to gain control of undervalued or strategically important companies.
• Domestic and Cross-Border M&A: Involves companies within India merging or acquiring one another.
• Reverse Mergers: To avoid the drawn-out IPO procedure, a private company buys out a publicly traded corporation. Getting rapid access to capital markets is the primary goal.

M&A Process: Step-by-Step –

• Strategy Formulation and Deal Planning: This is where companies decide on their strategic objectives – be it for market expansion, getting access to new technologies or efficiencies. The steps include determining market and competitive landscape, long-term business strategy alignment with M&A goals, establishing an internal Merger and Acquisitions team/ hiring advisors.
• Target Identification and Evaluation: Companies search for appropriate targets, based on strategic goals. Judging criteria includes a target's financial health and performance, market position and customer base, culture fit, and legal and regulatory risk.
• Preliminary Negotiations and Deal Structuring: After identifying a possible purchase target, conversations start informally between companies. This phase often commences with the execution of Non-disclosure Agreements (NDAs), a term sheet or a Letter of Intent (LoI), along with an 'indicative' or 'preliminary' valuation.
• Due Diligence: This is a comprehensive review of the target company's operations, finances, and legal standing.
• Financial Negotiations and Signing the Agreement: After due diligence, both parties renegotiate terms and conditions. Key components of the final agreement include: purchase price and payment method, representations and warranties, indemnity clauses, and conditions precedent.
• Regulatory Approvals: In India, several regulatory bodies may need to approve the transaction: SEBI (for listed companies), the Competition Commission of India (CCI), the Reserve Bank of India (RBI), and the National Company Law Tribunal (NCLT).
• Deal Closure: Once approvals are received and conditions are met, the deal is formally closed.
• Post-Merger Integration (PMI): The success of any Mergers and Acquisitions deal relies on the realisation of synergies. This phase encompasses orchestration of the operations and IT systems, bringing together HR and organizational cultures, monitoring the realization of synergies, and communicating with stakeholders and customers. PMI is especially difficult in India because of diversity of cultures, issues in compliance and scale.

Valuation approaches continue to evolve, and M&A strategies 2025 will demand more dynamic models that account for intangible assets and digital transformation.

The following are the valuation techniques -

• Discounted Cash Flow (DCF) Method: Under the DCF approach, the value of a company is the present value of its anticipated future cash flows, valued using the company's cost of capital. Appropriate for Firms with predictable cash flows (ex: utilities, infrastructure, IT services).
• Comparable Companies Analysis (CCA or Trading Multiples): A method of valuing a company that is based on valuation multiples of its industry peers. It’s great for benchmarking within an industry.
• Precedent Transactions Analysis: This method uses historical M&A deals in the same sector to estimate the value. It is useful for understanding industry evaluation trends and premiums paid.
• Asset-Based Evaluation: This approach values a corporation by determining the fair market value of the business’s assets less any liabilities. It is best for asset-heavy businesses (such as real estate and manufacturing).
• Market Capitalization and Control Premium Approach: This is for listed companies, its valuation is the Stock Market Capitalization adjusted with control premium in case of acquisition.
• Earnings and Revenue Multiples: For small and mid-sized companies, especially startups, simplified multiples like Price/Earnings (P/E) or Price/Sales (P/S) ratios are often used.
• Valuation for Startups and Early-Stage Firms: For startups and even young high growth businesses, the textbook numbers might not make any sense. Some common techniques are the Venture Capital Method, the Scorecard Method and the First Chicago Method.

While Mergers and Acquisitions (M&A) offer companies strategic advantages such as increased market share, diversification, and enhanced capabilities, they also come with several challenges and risks. Understanding these potential pitfalls is essential for companies to plan effectively and execute successful deals.

The following are the challenges faced –

1. Culture clashes can also sow the seeds of internal discord, disengagement, and down time.
2. Integrating IT systems, workflows and data infrastructure is often challenging and slow.
3. During the integration phase day-to-day business operations can suffer which may have an impact on service delivery and customer satisfaction.
4. Acquirers might be too optimistic about revenue or cost synergies and too pessimistic about the investment needed to achieve them.
5. India’s Competition Commission of India (CCI) could bring these to task if they feel a deal stifles competition in the market.
6. Controlled sectors such as banking, telecom and insurance need additional approvals from respective regulatory authorities.
7. Foreign exchange laws (FEMA) and FDI norms must be adhered to in international transactions.
8. Using too much debt to finance a transaction can stretch the balance sheet and lower financial flexibility.
9. Overpaying, as a result of bad valuation, can yield dissatisfied shareholders and lower returns.
10. Incomplete due diligence can lead to discovering tax or legal liabilities post-acquisition.
11. Post-merger uncertainty often results in the exit of key executives or employees.
12. Shareholders or board members may oppose the deal if they believe it adds no value.
13. Poor internal and external communication during M&A can lead to misinformation, confusion, and brand reputation damage.
14. Cultural misfit is one of the primary reasons for M&A failure globally as well as in India.
15. Market fluctuations between deal announcement and closure can affect the attractiveness and feasibility of the deal.

Successful M&A deals –

Adani Group Acquires Ambuja Cements and ACC (2022): Adani Group acquired Ambuja Cements and ACC for $10.5 billion, becoming the second-largest cement producer in India.

Failed M&A deals –

JSW Steel – Bhushan Power & Steel (2021–2025) - JSW Steel’s Rs 19,700 crore acquisitions of Bhushan Power & Steel, completed in 2021 under India’s insolvency framework, was overturned by the Supreme Court in May 2025. The court declared the resolution process illegal due to failures by the insolvency administrator and creditors’ committee, ordering Bhushan Power’s liquidation instead.

• Focus on Startups and Digital Assets: Established firms are acquiring startups to access innovation, AI, blockchain, and digital infrastructure.
• ESG and Sustainability-Linked M&A: M&A considerations are increasingly driven by Environmental, Social, and Governance (ESG) considerations.
• Cross-Border Activity on the Rise: Indian companies are expanding abroad, especially in Southeast Asia and Africa, through strategic acquisitions. Global players continue to invest in Indian tech, healthcare, and infrastructure sectors due to market potential.
• Sector Consolidation: Highly fragmented sectors like telecom, retail, healthcare, and logistics are witnessing consolidation for scale and efficiency.
• Private Equity and Venture Capital Involvement: PE and VC firms continue to be key drivers of deals, whether as direct buyers, or enablers of buy-outs.
• Increased Role of Technology in Deal-Making: AI and analytics programs are being used for valuation, for market predictions and for due diligence.
• Regulatory Simplification and FDI Reforms: The regulatory framework in India has started becoming M&A conducive with changes to FDI policies and corporate laws.

Merger and acquisition (M&A) deals remain central to the corporate strategies for growth and value creation on India’s dynamic business landscape. As we navigate 2025, M&A deals are increasingly influenced by technology, ESG factors, global economic shifts, and sector-specific dynamics.

The right M&A Strategy 2025 goes beyond financial strength — it requires strategic alignment, cultural compatibility, strong valuation models and a well-executed integration plan. As new trends like digital transactions, sustainability-linked deals and cross-border collaboration accelerate, companies will need to stay flexible and current to take advantage of new opportunities.

We provide company registration services to help startups register their companies with ease. Across India, we have been helping the startups set up their businesses. Our experienced lawyers will guide you through every step of the registration process. We offer our services at competitive prices in the market.

• One Person Company Registration Services
• LLP company registration services