Almost two decades have passed since India undertook its economic reforms, and the move has shown discernible results since then.

The country is now one of the fastest growing economies in the world, with several sectors such as IT and real estate doing exceptionally well. Moreover, growth in the country's Gross Domestic Production has remained consistently high, touching 9.6 per cent in 2006 and 9.2 per cent in 2007.

All these factors have instilled confidence and financial freedom in the Indian companies who are now far less apprehensive while trying out new things.

Mergers and Acquisitions (M&A) are a part of this new strategy of the Indian business firms that helps them not only establish a global presence but also tackle competition at home and abroad.

According to a study by CII-Boston Consulting Group, in 2005, there was a three-fold rise in overseas buyouts by Indian companies to $4.5 billion from $1.7 billion in 2004. This number was much less in 1998 with only 15 companies being purchased offshore by Indian firms.

Similarly, in terms of deal volumes in 2006, the IT sector accounted highest number of Indian offshore acquisitions (21%), followed by industrials (16%), the burgeoning healthcare sector (13%) and materials (11%). In 2007, the international acquisition patterns had remained in the same line.

In the first six months of 2008, more than 161 acquisitions have already taken place.

While UK tops the list in terms of deal value, the US is the No 1 targeted nation in terms of number of companies acquired by Indian entities.

A report released by financial and business adviser Grant Thornton said that the sale of Jaguar and Land Rover to Tata Motors helped to boost the total value of Indian acquisitions to $ 2.92 billion (£1.52 billion) in the first half of 2008.

While the total value of Merger and Acquisitions (M&A) with the US companies was $1.78 billion (£930 million) the same with the Netherlands companies was $1.07 billion (£561 million).

Around 41 American companies were purchased by Indian companies in the first half of 2008, compared to 20 UK firms. Besides JLR acquisition, the other significant overseas deal was Religare Capital Markets's acquisition of broking firm Hichens Harrison & Co Plc for $96 million (£50 million).

As far as the sectors are concerned, the acquisitions were more frequent in IT, telecom, software, and pharma. But given the broad-based economic upturn, sectors such as steel, automotive, FMCG and chemicals were not too far behind the overall tally.

But why are Indian companies choosing the M&A route for global success?

Part of the reason lies in the basic benefits of such deals that allow firms to gain access to new markets, expand their customer base, enhance products and services portfolios and gain new technologies and expertise.

According to the study by Grant Thornton, Indian companies are now flush with cash after a period of rapid economic growth and globalization, competitive pressure and high consumer demand are requiring them to rethink their positions.

A KPMG analysis on Indian firms provides further insight into the M&A trend, arguing that a combination of greater business opportunities and better availability of capital has brought about a mindset change and giving Indian companies. The study has analysed deal flows between 10 selected emerging economies and 11 key developed markets, using data sourced from Zephyr.

In all, 62 deals were reported with emerging market companies buying into the developed markets, while 105 deals were reported going in the opposite direction. In the first half of 2007, those numbers were 78 and 148, meaning that the post-credit crunch decline has been less marked in the developing markets. It also means that the emerging-into-developed deals now equate to 59 per cent of the developed-into-emerging total; the closest the two totals have ever been.

With reference to India, it has studied 35 deals between Indian companies and those from developed economies in the second half of 2007, following on from 34 in the first half.

Some recent examples of M&As by Indian firms:

Hindalco acquired the Canada based Novelis - total transaction of $5,982 million.

Tata Steel acquired Corus Group plc - total transaction of $12,000 million.

Dr Reddy's Labs acquired Betapharm – total transaction of $597 million.

Ranbaxy Labs acquired Terapia SA – total transaction of $324 million.

Suzlon Energy acquired Hansen Group – total transaction of $565 million.

Videocon acquired Daewoo Electronics Corp – total transaction of $729 million.

HPCL acquired Kenya sPetroleum Refinery Ltd – total transaction of $500 million.

VSNL acquired Teleglobe – total transaction of $239 million.

With all these M&As, the Indian companies still face a number of challenges in the deal process. Deciding on the right acquisition strategy on finance and management is a difficult task for many firms.

With this emerging trend of M&A can we expect a sustainable business environment in a long run?

In the same line of thought, can we expect India remain an attractive investment destination for the overseas players. We have challenges like terrorism, political crises, market instability, cases like Nandigram and Singur etc.

To solve all these problems we need proper economic and industrial policies, investment in R&D and continue to maintain quality standards along with quality of human resources.