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India-led M&As touch $40 billion in January-June 2010
June, 25th 2010

Takeovers by Abbot Laboratories and Bharti Airtel helped mergers and acquisitions in India quadruple in the first half of this year from a year ago, strengthening views that corporates are turning optimistic about earnings prospects.

Indian transactions accounted for a sixth of the total Asian deals of $242.1 billion from 5,078 deals, a rise of 21%. Bhartis acquisition of Zain assets in Africa for $10.7 billion tops the Asian list.

M&As in India touched $40 billion in the first six months of the year, according to a Thomson Reuters M&A report. This is the best first half since 2007. This calendar has seen outbound M&As pick up substantially on the back of good economic growth and valuations," said Raj Balakrishnan, head of M&A at BankofAm Merrill Lynch. We expect the interest in outbound activity to continue as Indian companies seek to expand globally. We will see medium-size deals and one cannot rule out larger billion dollar-plus deals either.

Sunil Mittals Bharti led the revival of India Incs acquisition frenzy with the purchase of Zain Africa in February. Mukesh Ambanis Reliance Industries is actively pursuing investments in the US shale gas ventures with the latest being the $1.3 billion payment for a 45% stake in Pioneer Natural Resources. Indian companies are also being bought with drugmaker Abbots buy of Piramal Healthcares formulations business for $3.72 billion. The telecom sector topped the league table with deals valued at $13.8 billion.

The thawing of credit markets last year after central banks co-ordinated measures has revived the spirit of Indian entrepreneurship. This follows a lull in 2008 and 2009 after a splurge in the 2004-07 bull run, which left many including Dr Reddys Laboratories and Tata Motors grappling with financial stress.

Since the demand in developed markets is plateauing, some of the global companies are willing to pay over the odds for Indian companies where a billion-plus population provides scope for growth.

Inbound M&A activity has been relatively subdued on account of valuation resistance but, going forward, this too may pick up as international companies realise the potential of the Indian markets, says Mr Balakrishnan. Value of deals in energy tripled to a record $8.8 billion, compared to a year earlier, the report said. The value of overseas acquisitions by Indian companies, known as outbound M&As, was nearly thrice that of acquisitions of domestic firms or, inbound M&As.

Abbotts acquisition last month is the highest inbound acquisition so far this year and the highest inbound deal in the healthcare sector on record, said the Thomson Reuters report. It is also the third-largest inbound deal in India on record. US companies topped the local purchases with more than half the value of the deal.

Private equity deals rose a slower 52% to $1.7 billion as valuations deterred deals. Transcend Infrastructures acquisition of privately-held Essar Telecom Infrastructure for $431.6 million was the highest in the segment.

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