The brutal heat of Indian summer did not stop deal-makers from striking one of the highest numbers of transactions ever in a single month in May. Although deal activity was led by mergers & acquisition (M&A) transactions, private equity (PE) and venture capital (VC) firms too were more active compared to the same period last year.

As many as 93 M&A and PE/VC deals were announced last month, translating into nearly one transaction every eight hours. The numbers in May were just short of the 103 deals, that were struck in March this year. This is around the same as the average deal volume in January-February 2008 period which saw the peak of deal activity in the country.

The biggest driver has been M&As as a robust domestic economy and improving scenario overseas allowed firms to relook at strategic expansion. As many as 65 M&As were announced last month, the highest ever in the month of May and just short of the recent best when 70 such deals were struck last March, as per data compiled by VCCEdge, the financial research platform of VCCircle.

The total value of deals also struck a recent high with deals worth $8.6 billion last month boosted by the return of multiple transactions of billion dollar size or more. Domestic deals continued to lead the charge with as many as 35 transactions involving two Indian firms. Outbound transactions have also seen better traction with 22 deals while the remaining seven were inbound deals. The total value of M&A deals rose 16 times over the same month last year.

Not surprisingly then the median as well as the average M&A deal size last month was the best ever in May 2010. The average deal size was $277 million while the median deal value was $34 million. This is also reflected in as many as eight deals worth $100 million or more, beating the previous best two years ago when seven such transactions were struck.

The most active sectors in terms of deal volume was IT with 16 deals in May followed by consumer discretionary with 14 deals and materials with eight.

Healthcare, financial services and materials were the most active sectors given the size of deal activity with transactions worth $3.7 billion, $2.3 billion, and $1.3 billion respectively. Together, these three sectors accounted for more than 86% of total deal value during the month.

The top three deals were all billion-dollar plus led by the high-profile acquisition of the formulations business of Piramal Healthcare by Abbott Laboratories for $3.7 billion. It was followed by Hinduja Group’s acquisition of KBL European Private Bankers for $1.6 billion and Hindustan Zinc’s acquisition of Anglo American Zinc by Vedanta Group firm Hindustan Zinc for $1.3 billion.

Although private equity deal flow has not been as consistent as M&As, it has attained a higher level this year. The number of PE/VC deals has come down compared to the two previous months, but it has risen sharply compared to 19 in the same month last year. With around 28 deals it is also in line with the average 25-35 deals over the last few months compared to 15-25 transactions per month around one year back. The PE/VC deal volumes last month was just marginally short of the previous best month of May’07 when 29 deals were struck.

Similarly, the PE/VC deal size has enlarged compared to last year but is yet to meet the super charged levels in 2007. The total PE/VC deal value was $630 million triple the value in May’09. The median as well as average PE/VC deal value also rose compared to same month last year but is yet to match the levels three years ago. Both median and average PE/VC deal values is about half of May 2007.

Financial services, materials and healthcare were the most targeted sectors for investment with deals worth $212 million, $166 million and $131 million respectively. Together, they accounted for over four-fifth of total private equity deal value during the month.

Major PE investments influencing the deal values of these sectors included investments by KKR in cement firm Avnija Properties Ltd, Temasek’s investment in National Stock Exchange of India and GIC’s investment in Fortis Healthcare.

The most active sector in terms of deal volume was financial services with nine deals during the month followed by consumer discretionary with five. Other sectors contributing to the deal volume were IT and industrials accounting for four deals each.

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