Why domestic M&As are few and far between.

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Tha authors speak about the following issues:

Grant Thornton, an accounting firm known for its research in M&A activities, says there were 42 cross-border deals in May, valued at $4.11 billion (Rs16,851 crore), while 32 domestic M&As during the month had a value of a mere $0.26 billion.

Reasons:
1) Indian corporations are closely held, with promoter group having a large stake.
2) In sectors such as banking and oil and gas, the government is a large player and there is a lot of resistenace to mergers from the unions.
3) Third reason for domestic M&A activity not taking off is because banks in India are not allowed to lend for acquisitions. “Under the Reserve Bank of India (RBI) norms, banks cannot finance an M&A deal if the acquirer is buying the equity of a firm. However, we can finance a deal that involves asset buying. In most of the cases, companies are buying equities and not assets,” says a senior banker who does not wish to be identified. RBI norms, however, allow banks to finance overseas M&A deals. On the domestic turf, banks are allowed to finance the government’s divestment programmes and acquistions in the infrastructure space. In the case of all other deals they can only finance the purchase of assets and not equities.