Deal street springs to life, July M&A volume up 23%

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Mergers & acquisitions and private equity deals are gathering steam in India, with July alone recording 110 deals worth $8.4 billion, marking a 36 per cent jump in value terms and 23 per cent expansion in volume terms over the year-ago period.

There has been a surge in domestic and inbound deal activities in terms of value, volume and trend after the national elections that threw up a stable and business-friendly government to power at the Centre with the promise of policy stability, Grant Thornton said in a report.

“July saw some big-ticket deals in the M&A space, valued at $6.5 billion (56 deals), against $4.6 billion in 2013 and $ 2.3 billion in 2012. The high value was due to higher domestic and inbound deal activity,” the global tax and business consultancy firm said.

In all, 660 deals worth $30.9 billion have been str­uck this year till July compared with $29.09 billion and $23.05 billion recorded for the same period in 2013 and 2012, respectively.

“There has been clear upswing in M&A and PE deal activity with three $1 billion-plus deals in July and $30 billion worth of deals in the first seven months,” said Raja Lahiri, partner at Grant Thornton India. He expects deal activity to increase further thanks to renewed interest from international players in Indian assets.

July also saw some big qualified institutional plac-ements (QIPs) worth $813 million (six QIPs), including those of JP Associates and GMR Infrastructure, both above $250 million in value.

Volume continued to grow in the private equity space too, with the deal value already touching $1.85 billion, swelled mainly by the $1 billion PE investment in Flipkart.

The comparable figure for the same period last year stood at $804 million.

“The e-commerce industry continues to dominate in PE space, and we just witnessed the landmark deal of $1 billion investment in Flipkart, which was followed by a $2 billion investment proposal by Amazon,” Lahiri said.

Halfway into August, the M&A list features the Rs 6,000 crore Adani Power-Lanco Infratech deal for the latter’s Udupi, Karnataka-based thermal power plant and a private equity deal by India-focused PE firm Samara Capital, which acquired a 45 per cent stake in information management services firm Iron Mountain India.

Kalpana Jain, senior director at Deloitte Touche Tohmatsu India, said there was a revival of interest in M&A and private equity deals. “There is a need for rationalising portfolios in infrastructure, such as road and power sectors, as the promoters spread themselves too thin when financing was easy. They will continue to offload assets, especially those which are close to completion or already functional, as debt financing is still difficult to get and also because of these assets are of strategic interest to other players,” she said.

Sector-wise, the IT & ITeS space saw the maximum number of M&A and PE deals in July. In terms of value, the energy and natural resources sector ($2072 million) and retail & consumer segment ($1913 million) topped the list in M&A deals while IT & ITeS firms ($1155 million) were top grosser in PE deals.

“In the private equity space, there is more interest in the consumer side of the business like FMCG and to a degree in pharmaceuticals. Hopefully, there is some rationalisation in promoter expectations, as they used to be too high earlier,” said Jain of Deloitte Touche Tohmatsu India.

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