Merger & Acquisition deals up 10 pct in 2017, but value declines
January, 29th 2018
The value of announced merger & acquisition (M&A) deals involving Indian companies amounted to $62.1 billion in 2017, down 3.5% compared to 2016.
The value of announced merger & acquisition (M&A) deals involving Indian companies amounted to $62.1 billion in 2017, down 3.5% compared to 2016, but still elevated compared to historical M&A activity, said a Thomson Reuters report. The report said despite the decline in deal value, the number of announced deals grew 10.6% compared to the previous year. The average M&A deal size for transactions with disclosed values declined to $84.6 million in 2017 from $102.3 million in 2016. The report said inbound M&A activity hit a record high of $31.7 billion, up 15% in 2017. Outbound M&A activity, however, declined sharply by 73.5% to $2.6 billion, making it the lowest outbound deals year since 2014. This totals to cross-border M&A activity of $34.3 billion, down 8.1% in value compared to 2016. Domestic M&A stood at $25.4 billion in 2017, down 0.5% in value from over a year ago, despite the 18.6% increase in the number of announced domestic deals. Completed M&A deals involving Indian companies totaled $59.4 billion in 2017, a 78.3% increase over 2016 ($33.3 billion), while the number of completed deals grew by 27.3%.
The telecom sector accounted for majority of the acquisitions involving Indian companies with a 29.8% share worth $18.5 billion, a more than a six-fold increase in deal value compared to 2016, making it the highest annual period of M&A deals for the sector since 2007 ($19.4 billion). In March, Vodafone Group PLC agreed to merge its Vodafone India assets with the mobile business of Idea Cellular for an estimated $11.6 billion, through a joint venture, via a scheme of arrangement. Upon completion, Vodafone will own 45.1% stake and Idea the remaining 54.9% interest in the joint venture. The pending transaction is currently the largest India M&A deal so far this year and the second largest-ever telecommunications deal involving India after the $12.7 billion Hutchison Essar-Vodafone Group deal in 2007.
Financials and high-technology rounded up the top three sectors for M&As, capturing 16.7% and 11% shares of the pie, respectively. Buyside Financial Sponsor M&A activity targeting Indian companies totaled $7.4 billion in 2017, a 59.1% increase from 2016, but the number of deals declined 8.5%. Private equity-backed M&A in India’s financial sector accounted for 44.2% of the market share worth $3.3 billion, up 182.3% from a year ago. Media & entertainment and consumer products & services followed behind with 10.5% and 9.1% shares, respectively. The report further said that deals of foreign firms acquiring Indian companies scaled to $31.7 billion in 2017, a 15% increase in deal value from 2016, surpassing the annual record high in 2007 ($31.4 billion). This was driven by the $11.6 billion mega deal between Idea Cellular and Vodafone Group announced in March.
The deal tilted the bulk of India’s inbound acquisitions to the telecom sector with a 48.2% share in terms of deal value, with $15.3 billion worth of transactions. Financials followed behind and accounted for 15.4% of India’s inbound M&A activity after proceeds reached $4.9 billion, up 179.5% from a year ago. United Kingdom entities were the top acquirers of Indian companies in terms of value, with $12.1 billion in 19 announced deals accounting for 38% of India’s inbound M&A activity. United States stood second and witnessed the most number of inbound acquisitions in India with 135 announced deals worth $6.3 billion, up 92.1% in value from last year, and captured 19.9% share. Japan took third place with an 11.6% share worth US$3.7 billion, up 231.8% in deal value from over a year ago. Indian acquisitions overseas stood at $2.58 billion in 2017, a 73.5% decline from last year alongside a 16.4% decrease in number of announced outbound deals. This is the lowest annual period in terms of deal value since 2014 ($2.55 billion).
The report added that majority of India’s outbound acquisitions targeted the industrials sector as deal value reached $776.2 million, and captured 30.1% of India’s foreign acquisitions. Healthcare, financials, and consumer products & services followed behind with 18.9%, 14.9% and 11.5% market share, respectively. United States was the top most targeted nation in terms of value and number of outbound acquisitions with 49 deals worth $890.1 million, down 26.8% in value from 2016. United States captured 34.5% of India’s overseas acquisitions followed by Finland and Singapore with 25.4% and 13.4% market share, respectively. Regarding private equity deals another report from Thomson Reuters said the total PE deals in 2017 rose to $10.31 billion from $4.9 billion in 2016. This, despite the total number of deals coming down from 271 in 2016 to 228 in 2017.