Deal activity in India slowed down for the month of July, with the total value of mergers & acquisition (M&A) and private equity (PE) transactions skidding to the lowest level in the last nine months. The downturn came due to the absence of mega deals and a dip in the number of transactions as deal volumes fell below the 100 mark for the first time since February this year, according to early numbers from VCCedge, the financial research platform of VCCircle.

Mergers & Acquisitions

M&A deal value reached its lowest for the calendar year in July, 2011, in the absence of any billion-dollar deal even as private equity numbers improved marginally.

M&A deal value stood at $1.36 billion across 58 deals during July, 2011, representing 68 per cent fall in value, even as the number of deals were higher, as compared to the same period last year.

January, 2011, had witnessed the lowest value in M&A deal-making before July, when it touched $2.7 billion across 54 deals. The M&A numbers for the seven months of this year stand at $34.45 billion across 451 deals.

In July, 2010, there were 43 M&A deals worth $4.2 billion, with several large inbound deals like Japan’s JFE Steel buying $1.1 billion worth of stake in Sajjan Jindal’s JSW Steel and Switzerland’s ABB increasing its stake in the local unit.

Also, the action in terms of deal value has shifted overseas although inbound and domestic deals continue to dominate in terms of deal volume. Around 64 per cent of the total value (worth $871 million) was generated by outbound deals, as compared to a meagre 3 per cent ($118 million) in July last year. There were 34 domestic deals, 7 inbound and 13 outbound deals.

Large deals during the month included travel services firm Cox & Kings buying European holiday specialist Holidaybreak Plc. for $510 million in the largest. Another big deal was Motherson Sumi Systems, India’s largest auto component maker, buying 80 per cent stake in Germany-based .

Private Equity & Venture Capital

Private equity and venture capital deal value was up 19 per cent to $980 million across 35 transactions, even as the deal volume fell, as compared to the same period last year. In July, 2010, there were 39 deals worth $824 million. The total PE/VC action for the calendar year 2011 till July stands at $6.7 billion across 277 private equity and venture capital deals.

Venture capital deal value more than doubled as India’s largest group buying site got a $40 million round. Venture capital deals stood at 10 transactions worth $71 million in July, 2011, as compared to 9 deals worth $31 million in July, 2010.

There were several large deals during July, 2011, with private equity giant Blackstone turning busy and closing large deals in Manyata Embassy Business Park and Visa Power. Also, Standard Chartered Private Equity was one of the most active players, completing transactions in Redington and Varun Beverages.

PE/VC Exits

More importantly, PE/VC exit value has increased by more than three times in July, 2011, hitting $540 million across 15 transactions, as compared to $176 million across 16 deals in July, 2010. There have been 72 exits worth $1.84 billion this calendar year.

PE investors made the best of slight improvement in market conditions and sold stakes in listed investments made in 2005-2006. While there were a few exits through secondary stake sale and buybacks, the IPO markets continued to stay shut.

Large exits included Warburg Pincus selling 2.28 per cent in Kotak Mahindra Bank for $172 million while ChrysCapital also shed 2.7 per cent stake in telecom firm Idea Cellular for $170 million.

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