India's Dealmaking Landscape Evolves: Value Surges Amidst Strategic Selectivity

India's mergers and acquisitions (M&A) market saw strong growth in 2025. Total deal value climbed 18% to $123.8 billion, up from $106.3 billion in 2024. This rise in value happened even as the number of transactions fell 3%. This signals a clear shift towards fewer, larger, and more strategic deals. It reflects a maturing market where investors prioritize long-term value and sensible prices, especially with higher perceived business risk and ongoing global uncertainty.

Why Investors Are More Selective

This focus on selectivity means dealmakers are spending more time and resources on due diligence. This is a direct result of geopolitical shifts and energy market volatility. While this can extend deal timelines and lead to more cautious planning, it helps ensure capital goes into assets with clear strategic value and growth potential. The approach prioritizes quality and strategic fit over just closing deals, a view shared by Amit Khandelwal, EY's Managing Partner for Strategy and Transactions. Meanwhile, Indian equity markets, like the NIFTY 50 and BSE SENSEX, saw modest returns in FY2025-26, falling over 5% and 7% respectively. This suggests M&A capital is following different drivers than the broader stock market.

Sector Performance and Cross-Border Deals

Infrastructure led deal values, rising 35% to $24.6 billion in 2025, despite an 18% drop in transaction volumes within the sector. The industrial and automotive sectors showed the most significant value growth, soaring 105% year-on-year, with volumes up a modest 4%. Private equity interest in manufacturing remained strong, focusing on areas like engineered products, auto components, precision manufacturing, and electronics. Cross-border M&A saw a 20% decrease in volume but a dramatic 155% surge in value to $33.2 billion. This boost came from inbound deals as global companies looked to secure Indian assets to reconfigure supply chains amid global changes. The Financial Services (BFSI) sector was also significant, accounting for over 26% of total M&A value and featuring in major deals, including substantial inbound investments from Japanese and Middle Eastern financial players.

India's Market Resilience

India's M&A market has shown strong resilience compared to global trends. Globally, M&A activity increased 43% in deal value to $4.7 trillion in 2025, largely due to mega-deals. India's success in attracting high-value strategic investments amid geopolitical tensions sets it apart among emerging markets. India's economic fundamentals offer a stable base, with GDP growth expected around 6.5-6.7% for 2026. Additionally, regulatory reforms, such as Companies Act amendments simplifying cross-border mergers and updates to merger control under the Competition Act, are designed to streamline deal processes and increase investor confidence.

Navigating Dealmaking Challenges

However, the move towards selectivity brings its own risks and challenges. Higher perceived business risk requires more thorough and time-consuming due diligence, which can raise transaction costs and extend timelines. Geopolitical uncertainties and the ongoing energy situation continue to create caution, pushing a critical focus onto business viability. Changes in merger control rules and potentially heavier compliance demands under competition law also present obstacles. While strategic M&A value is growing, the sluggish performance of Indian equity benchmarks in FY2025-26 shows broader market sentiment isn't fully in sync. This disconnect could create valuation risks for targets lacking strong strategic positioning.

2026 Outlook: Continued Value Focus

Industry forecasts suggest deal activity in India will remain strong in 2026, with dealmakers continuing to focus on substantial, high-value transactions. Analysts expect investor confidence to hold steady, backed by India's growth potential and its key role in global supply chains. Technology, healthcare, and renewable energy sectors are predicted to lead future M&A opportunities, alongside ongoing consolidation and inbound investment. Despite ongoing macroeconomic and geopolitical uncertainties, India's adaptable regulatory environment and robust domestic demand will support continued dealmaking momentum.