Merger and acquisition (M&A) activity declined by nearly 60 per cent in the quarter ended March compared with the corresponding period last year, according to a study.

Indian companies were involved in a total of 54 M&A deals, including cross-border and domestic transactions, in the March quarter as against 135 deals during the same quarter in 2008 and 89 deals during the immediate previous quarter, according to a study by the Chennai-based Venture Intelligence, a research service that focuses on private equity and M&A activity in India.

The first quarter of 2009 saw 26 deals with an announced value of $4.6 billion. There were 15 inbound and outbound deals each with the rest being domestic acquisitions. Manufacturing was the most active industry with 10 deals, followed by IT & ITES with seven. Healthcare and life sciences, food & beverages, telecom and agri-business were the other industries that witnessed significant M&A activity.

Large deals

The largest inbound deal saw France-based stationery manufacturer BIC acquiring a 40 per cent stake in Mumbai-based stationery-products maker Cello Pens for about $160 million (Rs 800 crore). Other notable inbound deals included American Tower Corporation acquiring XCEL Telecom; Mylan Labs acquiring residual stake in Matrix Laboratories and Sodexos acquisition of Radhakrishna Hospitality Services Group.

The Radhakrishna Hospitality and Cello Pens deals seem to validate the thesis that 2009 is likely to witness significant inbound transactions by multinational companies with strong balance sheets seeking to acquire Indian companies when valuations are attractive, said Mr Arun Natarajan, CEO, Venture Intelligence.

Global buys

The March quarter also saw Indian companies aiming to close out on their acquisitions of global energy/commodities assets. Notable deals in this category included ONGC Videshs closing out on the acquisition of UK-based Imperial Energy for $1.9 billion and Sterlite Industries new bid for US-based copper mining firm Asarco at a renegotiated value of $1.7 billion.

The largest domestic M&A deal during the period was Reliance Industries acquisition of group company Reliance Petroleum. In other domestic deals, Private Equity-backed Nuzhiveedu Seeds acquired a 51 per cent stake in two seed companies Yaaganti Seeds and Pravardhan Seeds during the period, according to the study.