Dealmakers see $30b M&As on stable govt

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Inbound deals to gain pace as investors await policy clarity

Mergers and acquisitions market in India is likely to see increased momentum after elections and experts believe overall deal values in India could exceed $30 billion this year if Lok Sabha polls result in a stable government at the centre.

Post-elections, the pace is expected to be greater for inbound deals, which have been largely pushed back for many months now for want of better clarity on the policy stance of new government, experts said.

The deal street in the country remained moderate during the first two months of the year with only 170 deals worth $4.2 billion as cross-border activity remained tepid, as per Grant Thornton data.

There is a strong sense in the market that the situation would improve post-elections provided the new government's economic policies encourage foreign direct investment (FDI) and make doing business in India easier.

Sanjeev Krishnan, PE and transaction services leader at PwC India, said, "if there is a stable government (BJP or any other), economic reforms would be back on the government's agenda. Then India would be looked at much more positively by both strategic and PE investors."

"In terms of numbers, at the minimum, I expect overall deal values in India to exceed $30 billion this year and private equity investments to exceed $12.5 billion in 2014--15. However, if a weak or significant coalition dependence emerges, the numbers could be much lower," he said.

Echoing the sentiment, Girish Vanvari, co-head of tax at KPMG in India, said, "Election outcome can be a game changer. If a stable government emerges at the centre and the new government takes steps to demonstrate stability of tax and regulatory regime in the country, it would restore the much-needed investor confidence."

After elections, Vanvari said, "We could also see the number doubling from year on. Take an example of the recently announced Sun Pharma-Ranbaxy deal, upwards of $4 billion in one deal itself and if there are four-five deals like this, imagine where the numbers can be."

The increasing political uncertainty over the past one year along with a fear of a fractured mandate and policy paralysis perception have resulted in creating a cautious approach among strategic players, experts believe.

"The year 2014 is being anticipated to be a big year for M&As, especially for big-ticket deals. But most of it is expected to take off after the general elections," Sumant Sinha, chairman and CEO of ReNew Power, said.

Consumer, healthcare, metals, real estate and telecom sectors might see the biggest share of deals taking place, he added.

But Grant Thornton India LLP partner Harish HV believes deals are independent of economic cycles. Larger deals tend to happen when the financial markets are buoyant and money is easy to raise. In weak market conditions, capacity consolidation tends to happen.

From P1

“We expect that the deal market will continue its present momentum and don’t expect a dramatic change to the Deal Street based on elections,” he said.

“If the economic policies are such that it encourages foreign direct investment (FDI), we would see inbound deals. If the rupee appreciates and fund raising becomes easier due to buoyant market conditions, we can see more outbound deals.”

According to Grant Thornton, in 2013 there were 500 deals worth around $28 billion, much lower than the deal volume in the previous two years.

In 2012, there were 598 deals worth $35 billion, while in 2011, there were 644 transactions worth $45 billion.

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