India’s M&A Rollercoaster: From a Record-Breaking Q1 2025 to a Sudden Q2 Slowdown – What’s Really Happening? 

At the start of 2025, India created a headline internationally with regard to mergers and acquisitions. Analysts viewed the first quarter of 2025 as being within a “mini M&A boom,” because the market was optimistic, private equity firms were actively investing their dry powder, and corporate India seemed fearless. However, just as everyone thought India was at the beginning of an important consolidation cycle, the second quarter of 2025 presented a surprising turn of events; there was a significant decrease in M&A activity that caused confusion among dealmakers. 

If you are considering an investment banking course or studying for a course on mergers and acquisitions, you will find this cycle to be one of the best examples in a real-world environment to help you better understand how deal markets react when there is uncertainty. 

So, what happened between the great first quarter and cautious second quarter? This will be detailed below with actual data, industry sources, and a broader global perspective. 

India broke records in Q1 2025 with a performance of 55-60 Billion+ in M&A for the country, making it one of its best Q1’s in recent memory based on the EY India M&A Report 2025. 

How did this happen? 

1. Technology and AI Consolidation 

Businesses have begun scrambling to buy AI startups, automation technologies, and SaaS companies to compete. As enterprise AI has begun to roll out globally, it created an urgency among many Indian Tech/IT conglomerates to quickly create a stronger portfolio. 

2. A Boom in Green Energy Transactions 

The market for electric vehicles (EV) charging infrastructure, battery technology, and solar energy companies is experiencing a huge surge in interest as a result of India’s aggressive net zero goals. 

The IEA Energy Outlook 2024-25 Outlines that, as of 2024, India will be one of the fastest-growing clean energy markets in the world. 

3. There Is a High Level of Private Equity Interest  

Domestic Private Equity/Venture Capital funds have deployed an unprecedented amount of dry powder to help bolster confidence in India’s economic and macroeconomic stability. 

If Q1 was an indicator of what was to come next, it was just the start of the new mega cycle until Q2 changed the outlook and tone of this new cycle. 

Q2’s Unexpected Slowdown: What Triggered the Shift? 

Industry trackers noted a 25–35% drop in deal volume in Q2 2025 compared to Q1. 

Here’s what changed: 

1. The Election Effect 

As India approached its general elections, companies pressed pause. Historically, deal activity slows down by 15–25% in every Indian election year, as per KPMG Deal Advisory Data. 

Regulatory uncertainty, policy unknowns, and possible taxation changes make boards cautious. 

2. US Fed Delays Rate Cuts 

Everyone expected interest rates to ease by early 2025, but the US Federal Reserve signaled delays. Higher global borrowing costs meant multinational acquirers postponed deals. 

3. Geopolitical Volatility 

Conflicts in the Middle East and rising shipping costs affected risk appetite. Cross-border deals suffered the most due to USD volatility. 

4. Companies Wanted Stronger Valuation Discipline 

Q1’s enthusiasm pushed valuations up. By Q2, acquirers demanded realistic pricing. 

This created a “valuation mismatch,” one of the biggest reasons many deals went into “wait mode.” 

Sector-Wise Breakdown: Who Hit the Brakes First? 

1. Technology & Startups 

Even though AI was booming, the funding winter’s shadow lingered. 

Buyers hesitated due to uncertain global enterprise spending and overvalued SaaS startups. 

2. Manufacturing & Infrastructure 

Rising raw material prices and cautious capex slowed inorganic growth plans. 

3. Renewable Energy 

Investors wanted clarity on potential subsidy reforms and policy updates expected after elections. 

4. BFSI (Banking & NBFCs) 

The RBI’s increased scrutiny on NBFC loan books, reported in the 2025 Financial Stability Report, delayed approvals. 

Even though the slowdown affected all major sectors, experts say it wasn’t a crash, just a recalibration. 

How Global Markets Rippled Into India’s M&A Slowdown 

India does not operate in a vacuum. The global economy in early 2025 was marked by uncertainty. 

1. US & European PE Firms Became Cautious 

Concerns over recession in Europe, reported in the IMF World Economic Outlook 2025, cooled global investment flow. 

These global private equity giants often play a major role in Indian buyouts. Their caution meant fewer mega deals. 

2. Currency Volatility Delayed Cross-Border Deals 

An example seen in Q2: 

Several India-Singapore and India–UAE logistics and tech deals were postponed due to unexpected dollar swings. 

3. China Slowdown Affected Regional Supply Chains 

China’s slower manufacturing sector recovery pushed buyers in Asia to adopt a “risk-neutral” stance. 

The Valuation Mismatch Problem: A Quiet Deal Killer 

One of the biggest reasons for Q2’s M&A slowdown was the widening gap between seller expectations and buyer willingness. 

• Sellers expected Q1-style high valuations. 

• Buyers became conservative due to macro uncertainties. 

According to Bain India PE Report 2025, over 40% of stalled deals globally were due to valuation mismatch. 

This mismatch is actually a healthy correction, preventing overpriced acquisitions and future balance-sheet stress. 

Election-Driven Policy Uncertainty: A Key Slowdown Factor 

Before and during elections, companies generally avoid deals requiring regulatory approvals. The same happened in Q2 2025. 

Key concerns: 

• Possible changes in foreign direct investment (FDI) norms 

• Digital competition regulation updates 

• Taxation adjustments 

• New AI governance rules under consideration 

These factors pushed many deals into a temporary holding pattern. 

A common insight from bankers: 

“Nobody wants to close a multi-billion-dollar acquisition weeks before a new government forms.” 

What Investment Bankers Are Saying About This Slowdown 

Major deal advisory firms such as EY, KPMG, Deloitte, and Kotak Investment Banking indicate that: 

• The Q2 slowdown is temporary, not structural. 

• Deal pipelines for H2 2025 remain very strong. 

• Companies are using this quarter to reassess valuations, renegotiate terms, and prepare for aggressive post-election acquisitions. 

Many analysts believe 2025 could still end as one of India’s top three M&A years. 

For students exploring an investment banking course, this situation offers a real-time view of: 

• Market cycles 

• Deal psychology 

How bankers navigate uncertain quarters 

Will India’s M&A Market Rebound in Q3 & Q4? Experts Say Yes. 

Most global and domestic consulting firms forecast a strong rebound once the election dust settles. 

Reasons for Optimism 

1. India’s GDP Outlook Remains Strong 

The World Bank’s India Development Update 2025 maintains India’s growth projection above 7%, one of the highest globally. 

2. Interest Rates Expected to Ease 

Once global rate cuts resume, PE investment will pick up. 

3. Key Sectors Poised for Big Deals 

• Green energy 

• Digital infrastructure 

• Healthcare 

• BFSI consolidation 

• EV manufacturing 

• Logistics & supply chain tech 

Analysts predict Q3-Q4 could even outperform Q1 if macro conditions stabilize as expected. 

What Students and Young Professionals Can Learn From This Rollercoaster 

This M&A cycle is a masterclass in understanding business behaviour during uncertainty. 

Key Takeaways: 

• Timing matters: Deals are often about choosing the right moment. 

• Valuation discipline protects businesses: Overpaying during hype cycles can be disastrous. 

• Macroeconomics directly shapes deal-making. 

• Regulatory awareness is crucial, especially in India’s complex landscape. 

Anyone pursuing a course to learn mergers and acquisitions will find this real-world cycle incredibly valuable. It shows how bankers think, how companies negotiate, and why even a booming market can suddenly pause. 

Conclusion 

India’s journey from a record-breaking Q1 to a slower Q2 is not a downfall, it’s a reflection of global uncertainty, election-season caution, and healthy valuation discipline. The fundamentals that drove Q1 remain strong: corporate confidence, AI-led innovation, renewable energy expansion, and India’s long-term economic resilience. 

As dealmakers regroup in anticipation of post-election stability, Q3 and Q4 could mark the beginning of a renewed and stronger M&A cycle. 

For anyone passionate about finance, M&A, or investment banking, 2025 is shaping up to be one of the most insightful years to observe, and learn from. 

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