Mergers and Acquisitions: A Game Changer for MSMEs in India

By Dr. Charu Rawat

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of the Indian economy. They create jobs, support big industries with supplies, and help in the growth of villages, towns, and cities. But many MSMEs face several problems that stop them from growing.

Let us understand what these problems are and how Mergers and Acquisitions (M&A) can help MSMEs become stronger.

M&A can help MSMEs survive and thrive

Challenges Faced by MSMEs in India

1. Lack of Finance: Many MSMEs do not get enough loans or investments. Banks often

hesitate to give money because of lack of collateral or paperwork.

2. Outdated Technology: MSMEs sometimes use old machines or methods which reduce productivity and quality.

3. Limited Market Reach: Many MSMEs operate only locally and do not have access to national or international markets.

4. Poor Infrastructure: Power cuts, bad roads, and lack of proper warehouses make

operations difficult.

5. Low Formalization: Many MSMEs are unregistered or work in the informal sector. This stops them from getting benefits from the government or banks.

6. Lack of Skilled Workforce: Many small enterprises find it hard to hire skilled workers or train their existing staff.

How Mergers and Acquisitions Can Help

Mergers mean two companies join to become one. Acquisitions mean one company buys another. These strategies are commonly used by big companies, but now even MSMEs ares tarting to benefit from them.

Here’s how M&A can help MSMEs:

1. Access to Finance: When two MSMEs combine, they pool their resources. This

improves their balance sheet and makes it easier to get loans or investors.

2. Better Technology: Merging with a firm that has better machines or digital systems can improve quality and productivity.

3. Bigger Market Reach: M&A can open doors to new markets, customers, and even

export opportunities.

4. Sharing Infrastructure: When MSMEs come together, they can share warehouses,

transport, and offices, which reduces costs.

5. Skilled Teams: By joining forces, MSMEs can build stronger teams, hire better talent,

and improve efficiency.

6. Stronger Brand: Together, MSMEs can build a stronger brand name, improve visibility, and compete better with large companies.

Government Support for M&A in MSMEs

The Indian government has started giving support to encourage mergers and acquisitions, especially for MSMEs. Some relaxations and incentives include:

• Decreased stamp duty on transfer of assets in some states.

• Simplified merger process under Section 233 of the Companies Act, 2013 for small companies and startups.

• Fast-track approvals through the Ministry of Corporate Affairs for certain categories.

• Credit Guarantee Schemes, like CGTMSE, which continue to support merged MSMEs.

  Also, under the Startup India initiative, M&A of startups with MSMEs is also being encouraged with tax benefits and regulatory ease.

Successful Examples

1. Bira 91 – The famous craft beer brand started as a small enterprise. When it acquired small breweries with better technology and presence in other regions, it could expand rapidly across India and into international markets.

2. Tata Power and Welspun Renewables – Though Tata is a large company, its

acquisition of a smaller player in renewable energy helped create one of India’s largest

clean energy businesses. This shows how even large firms value M&A to grow and

support smaller partners.

Mergers and Acquisitions are not just for big companies. They can be a powerful tool for

MSMEs that want to grow, become more competitive, and survive tough times. With proper planning, the right partner, and support from the government, M&A can truly be a game changer for Indian MSMEs. The future belongs to those who collaborate, innovate, and grow together.

If you are an MSME owner, think about how joining hands with another business could help you overcome your challenges and move towards success. For assistance in Mergers and Acquisitions, Contact KINBIN Financial Services (8112976363)