Key M&A trends shaping the startup ecosystem in 2024: the US and India market perspective

By: Arunima Motiwala

The M&A landscape has changed significantly, influenced by the pandemic and economic fluctuations. Throughout COVID-19, there was a notable surge in digital transformation across sectors such as technology and healthcare. Following the pandemic, there was a rise in mergers and acquisitions, fueled by low interest rates and a wealth of available capital. However, in 2023, inflation and increasing interest rates started to affect valuations and the volume of deals. Despite these hurdles, industries like technology, healthcare, and sustainability continues to thrive, shaping M&A trends for 2024.

Tech and AI startups steal the spotlight

As businesses seek to expand their capabilities, tech and AI firms are leading mergers and acquisitions. As demonstrated by Replit, an AI-powered coding platform that received $100 million in 2024 and attracted interest from large tech companies keen to expand their AI portfolios, there is a significant market for AI and machine learning businesses in the US. M&A activity is increasing in India, but at a slower pace. The $230 million purchase of Device42 (a US based Company) by Freshworks in 2024 demonstrates initiatives to improve IT management with AI. Moreover, Reliance Jio’s JioBrain initiative seeks to democratise access to AI, emphasising India’s commitment to innovation and its plan to use AI to boost user engagement and competitiveness.

Growth in cross-border M&A

Cross-border M&A activity is on the rise, as U.S. and Indian companies pursue global growth opportunities. The $1.6 billion acquisition of Bharat Serums by Mankind Pharma underscores the interest of U.S. firms in India’s pharmaceutical sector, while Bharti Airtel’s $4.08 billion investment in BT Group enhances its global telecommunications footprint. This trend illustrates a shared ambition for market diversification and international expansion.

Sustainability and ESG-driven acquisitions
Concerns about Environmental and Social Governance (ESGs) are playing a larger role in shaping M&A strategies. In the US, companies like Charm Industrial, which focuses on carbon capture, are drawing attention from buyers who prioritise sustainable solutions. Tesla’s focus on battery innovation further underscores the trend towards technology driven strategies.

In India, there has been a significant uptick in M&A in the energy sector, especially in solar and wind, fueled by ambitious targets and increasing energy demands. The recent investment in SolarSquare by IvyCap Ventures highlights the growing interest in sustainable businesses that meet ESG criteria. Moreover, supportive regulations and promising foreign investment opportunities are likely to direct funds into India’s energy projects.

The evolving strategies within the fintech industry

Fintech continues to be an active sector for M&A as companies strive to take the lead in digital finance. In the U.S., there is a strong demand for digital-first payment startups. For instance, Robinhood’s acquisition of Pluto, a financial planning platform aimed at Gen Z, and Stripe’s purchase of payment processor Lemon Squeezy are both strategies to expand their market presence and service offerings. However, in India, fintech companies are shifting their focus from mergers and acquisitions to organic growth and preparing for initial public offerings. The fintech industry is expected to reach $150 billion by 2025, fueled by AI-driven advisory services and UPI-based credit solutions.

Evolving regulatory landscape

Regulatory scrutiny, especially concerning antitrust and data privacy, has influenced tech mergers and acquisitions in recent years. However, in 2024, U.S. regulatory enforcement has eased. While agencies had previously contested major deals involving Nvidia, Meta, and Microsoft, there is now a more lenient approach to startup acquisitions. In India, the changing landscape of data privacy regulations and the government’s emphasis on self-reliance, particularly through the “Make in India” initiative, have presented both opportunities and challenges for mergers and acquisitions. Deals involving foreign investors are now subject to greater scrutiny, particularly in sectors deemed strategic, such as telecommunications and technology.

Conclusion

In 2024, mergers and acquisitions are being shaped by technology, sustainability, and cross-border growth, with startups at the forefront of industry change. Companies in the U.S. and India are acquiring capabilities in AI, green technology, and fintech to maintain their competitive edge. Startups are leading the way in digital transformation, promoting sustainable practices, and driving financial innovation, all backed by supportive regulations. This M&A environment emphasises agility, collaboration, and sustainable growth, with startups playing a crucial role in advancing global progress.