M&As, PE flows to remain robust in 2025 despite economic uncertainties, say experts

Mergers and Acquisitions (M&A) in India are becoming the new corporate flavour to entice shareholders as consolidation takes hold in different sectors towards organised business structures. February 2025 saw the highest monthly deal volumes in the last three years that combined M&A deals and private equity investments.

A total of 226 deals valued at $7.2 billion were recorded in February, representing a 14 per cent increase over the previous month, according to a deal tracker report by Grant Thornton Bharat (GTB).

This included a total of 85 M&A deals at $4.8 billion, and 141 PE deals at $2.4 billion. The deals showed a massive 67 per cent increase in volumes and a 5.4-fold increase in values compared to February 2024.

What’s fuelling the M&A & PE momentum?

Amid an uncertain global economic environment subsuming declining foreign investments in Indian markets and looming trade tariffs, it was the robust domestic demand that carried the Indian dealscape.

“Despite global macroeconomic headwinds, India continues to see strong deal momentum, fueled by strategic divestitures and acquisitions by companies to optimize operations, stimulation of both domestic and inbound M&A,” said Rohit Berry, president- strategy, risk & transactions, Deloitte India.

India is still in a very bright spot, said Mayank Rastogi, investment banking partner at EY India, adding that geopolitically, India has taken a neutral stance making India reasonably attractive to global investors.

Rastogi said that M&A activity is no longer just inbound as there are early signs of outbound M&A from Indian companies, especially in sectors like pharma, chemicals, and engineering. “The last couple of years saw a lot of activity in healthcare, consumer, infrastructure, and auto. We expect that momentum to continue, especially in manufacturing sectors,” he added.

On the other hand, in February 2025, the PE space witnessed both deal volumes and values rising month-on-month since November 2024 and the highest monthly deal volumes since May 2022.

Private equity has been picking up for the last 6-8 months. India-focused funds are raising larger amounts each time — we now have fund houses managing two, three, even five billion dollars. That’s a meaningful shiftMayank Rastogi, investment banking partner at EY India

Optimism in India’s PE landscape is rising with continued interest from sovereign wealth funds, pension funds, and global investors.

Experts say infrastructure and energy focussed business are becoming the PE darlings with green energy, logistics, and public-private partnerships driving long-term investment commitments.

Which sectors are in focus?

According to the GTB report, retail and consumer, IT & ITES, banking and financial services, and pharma, healthcare and biotech sectors were the key drivers for volume growth, contributing 60% of the overall volumes.

Meanwhile, traditional sectors, including energy and natural resources, media and entertainment, manufacturing and infrastructure management led value growth, accounting for 66% of the total values.

M&A outlook remains bright

Experts predict that M&A deal value is projected to grow significantly in 2025, rebounding from 2023 and 2024 levels due to improved investor confidence and a positive global economic outlook.

“However, factors such as U.S. reciprocal tariffs and the India-EU trade deal (BTIA) among others do add complexity to balancing economic interests. A divergence between deal value and volume indicates a shift in M&A dynamics, with deal value rising from $110 billion USD in 2024 to a forecast range of $130-$160 billion USD in 2025, while volume remains stable at 1450-1550 deals,” said Berry.

This, Berry said, suggests a focus on larger, high-value strategic deals in high-growth sectors. Private equity deal value is projected to grow modestly, while strategic investments are anticipated to expand more rapidly.

PE activity to become more robust

According to industry experts, the private equity industry is sitting on record levels of ‘dry powder’ — capital ready to be deployed. India’s appetite to absorb that capital is growing alongside opportunities in large conglomerates and the middle market, they said.

“India is probably the only meaningful growth economy right now. For global investors, it offers stability, growth, and demand — making it a real alternative to China,” said Rastogi.

Experts point towards a couple of reasons that will propel a moderately high fundraising momentum which will be fuelled by improved liquidity and lower interest rates.

In 2024, extended holding periods constrained deal flow. However, rising tech IPOs and successful exits signal momentum for 2025. Tech IPOs increased from 5 in 2023 to 12 in 2024, with 92% listing at a premium. With 20+ IPOs expected in 2025, monetization opportunities may drive PE activityRohit Berry, president- strategy, risk & transactions, Deloitte India

Apart from improved liquidity, expected rate reductions in 2025 could lower borrowing costs and spur deals, though capital market uncertainties may slow deployment, Berry added.

In February, the Reserve Bank of India (RBI) reduced the policy repo rate by 25 basis points to 6.25%. According to a report by Fitch Ratings, the repo rate is expected to drop further to 5.75% by December 2025.