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M&As In India Revisit 2007 Golden Period; Deal Value Crosses $43B

13 September, 2010

Year 2010 is all set to create a new benchmark in terms of corporate mergers and acquisitions (M&A) and private equity (PE) transactions in India. The total value of M&As in the first eight months of this calendar year has already surpassed the total value of such deals struck in the whole of 2007, that was the previous best with a number of marquee deals.

If PE transactions pick up in the next one quarter or if the Vedanta-Cairn deal goes through, then 2010 will end up more than thrice the deal value as compared to the entire 2009 of $16.24 billion.

The total value of M&As has already crossed $43.1 billion (January-August’10) as per VCCEdge, the financial research platform of VCCircle, as compared with $36.56 billion in whole of 2007. And if the mega merger between GTL Infrastructure and Reliance Infratel had gone through, the deal value would have jumped much over $50 billion.

But still given that there are four months to go and one blockbuster deal (Vedanta-Cairn worth $9.6 billion) already in the works, at least in terms of M&As, this year is going to set a new high. In fact the first eight months of this year has also surpassed the deal volumes in corresponding period in 2007.

What’s woefully lagging behind is PE transactions, but only so due to lack of big ticket transactions. The number of PE transactions in the first eight months of this year has already surpassed the previous high three years ago. Although PE deal value has shot up around 50% to $6.5 billion in the January-August’10 period over the year ago period, it is much behind the corresponding period in 2007 when PE transactions worth $10.069 billion and 2008 which saw PE deals worth $10.99 billion.

AUGUST SHOWERS

PE investments in India in August grew 7.5x to $1.3 billion over the same month last year and the number of transactions increased 45% to 35 over August 2009. The quantum jump in deal value is due to some large-sized deals including Macquarie-SBI Infrastucture Fund

investing in Viom Networks, Blackstone- Moser Baer Projects besides Macquarie-SBI Infrastructure Fund putting in money in GMR Airports Holding. All these deals were $200 million or more in contrast with total value of PE deals of just $179 million in August 2009.

This shows larger size deals have started flowing in as PE firms are getting comfortable with the new level of corporate valuations and larger economic growth in the country.

Industrials, telecom and financials were the most targeted sector for investment with deals worth $309 million, $304 million and $298 million respectively last month. The most active sector in terms of deal volume was financials with 10 deals during the month, followed by

industrials (7), healthcare and consumer discretionary with five deals each.

M&A value in India in August 2010 grew nearly seven-fold to $4.2 billion, up from $620 million in August 2009. Deal volume also jumped to 58 deals up from 34 in August last year. The biggest deal last month was Adani Enterprises’ acquiring coal assets of Linc Energy for $2.7 billion.


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M&As In India Revisit 2007 Golden Period; Deal Value Crosses $43B

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