Buoyant pick up in mergers and acquisitions reflects a further firming up of business confidence
October, 28th 2015
The pickup in foreign investments flows highlighted in global surveys of CEOs also seems to be impacting on the volume of the mergers and alliances in the corporate sector. Most recent numbers collected by the M&A intelligence services Mergermarket for the period January to September 2015 show that India tied up 309 mergers and acquisitions which is about a third more than the 224 deals stuck in the same period last year.
But though the total value of the deals went up only buy 10.2% from $ 22.5 billion in the last year to $ 24.8 billion in the current year it was the highest pickup in value terms since 2012. Obviously the average size of deals has fallen through in line with falling market trends. Numbers show that average size of the mergers and acquisitions came down from $10 million last year to around $8 million now.
Most of the deals were secured by international bidders with a major component carried out by companies outside the Asia Pacific region. What makes the revival in mergers and acquisitions especially welcome is the resurgent private equity activities. And the revival was extensive with buyouts, exits and secondary buyouts surging up substantially.
And both inbound and outbound deals remained buoyant indicating not only the increasing confidence of the foreign investors in Indian economy but also the rebounding interests of Indian companies in foreign investments. Among inbound transaction the biggest deal was the acquisition of Cairn India by Vedanta at a cost of $ 2.2 billion. Surprisingly the mergers and acquisitions gained the most traction in the primary sectors constituting energy, mining and utilities where the global plummeting commodity prices has had the worst impact. The number of deals in this segment went up more than threefold from 9 to 28 pushing up the value of the deals to $3.7 billion which was roughly about 15% of the total deals.
Other important segments where the deal size expanded substantially in value terms included technology, industrials and chemicals, construction and financial services. However, some other important segments like consumer goods and pharma, medical and bio tech saw the total size of the deals shrinking substantially in the first nine months of the year. Across countries it was the US companies which took the strongest interest in India with their firms accounting for 7 of the top ten deals. Equally invigorating is the recent investment trends by Indian companies abroad which went up substantially in value terms. But while the value of the deals went up 163% from $ 1.7 billion last year to $ 4.4 billion this year the absolute number of deals shrunk from 57 to 50 during the period. However, the one of the largest deals was done by the public sector company ONGC Videsh. The resurgence is M&A deals certainly marks a buoyant spell for Indian corporates.