Corporate deal activity revved up during the year with private investors signing larger cheques and companies turning bullish on inorganic growth to expand and announcing deals well into the fag end of the year. This was in line with the overall economic revival with the formation of the new government at the centre early this year.
What’s noteworthy, however, is that the revival is more in terms of aggregate value of deals and not in terms of transaction numbers. This implies while investors and companies are getting bolder the momentum is yet to be driven by more firms.
An exception to this is the early stage investments where angel/seed rose significantly compared while VC and transactions also increased compared with 2013.
In total, there were transactions worth close to $43 billion this year spread across some 1,660 transactions across M&As, PE, VC and angel investments against deals with a declared value of $37.6 billion in 2013, as per early information collated by VCCEdge, the data research platform of VCCircle. The actual value of deals in both the years would be higher as transaction terms of a few deals are not announced.
This marks the second successive year when the aggregate deal value has risen after shrinking by a third in 2012.
The total tally includes some investments made in multiple tranches, PE investment through the secondary market in bourses as well as intra group amalgamations besides plain vanilla asset purchases and growth capital investments.
Here’s a quick recap of the year in terms of deal activity.
There were a total of 857 deals worth $29.8 billion which were announced or closed during the year. This marked a rise in terms of value but was almost flat in volume.
In effect the combined value of M&As hit the highest level since 2011 even though the country had seen more number of M&As in the previous years.
While oil & gas propped up the overall deal counter last year, there was better sectoral spread of M&As in 2014 across banking, power & infrastructure, cement, pharma, beverages, etc. Many of these are work in progress at the end of the year, facing regulatory and other hurdles before they are sealed.
Some notable deals announced this year include Sun Pharma’s proposed acquisition of Ranbaxy, Kotak Mahindra Bank’s impending acquisition of ING Vysya, Bharti Airtel’s tower sale in Africa, Adani’s deal to buy power units of Avantha and Lanco, among others.
There were a total of 281 PE transactions worth $10.8 billion this year with around 24 deals valued at $100 million or more, almost the same as last year. While the overall PE investment value was marginally higher (around 10 per cent) the number of PE transactions fell by a sixth this year. This means fewer firms attracted more capital from PE investors for the second successive year.
Indeed, the increase in overall PE investment value could be easily attributed to investors literally pouring money in Indian e-com sector with Flipkart itself attracting $1.91 billion this year. Close rival Snapdeal snagged around $1 billion more.
Other notable deals were struck by Brookfield (Unitech’s IT parks), Temasek (Intas Pharma), TPG (Sutherland) and CPPIB (Kotak Mahindra and L&T Infra).
In fact, sovereign funds have been involved with half of all the $100 million plus transactions this year.
There were a total of 236 venture investment deals worth over $2 billion against 225 deals worth $1.4 billion last year. However, larger size of late stage VC funding round in firms like Olacabs and Zomato among others skewed the overall numbers in terms of value.
But higher transaction numbers show VC investment space is still much better placed compared with PE dealmaking where the market seems to have consolidated with fewer firms cornering more money.
The significant VC funding rounds were clocked by Olacabs, Zomato, TaxiForSure, Freshdesk, Commonfloor, Hungama, Delhivery and BigBasket.
Series A round of funding, which is a significant milestone signalling VC appetite for backing startups, saw a revival but just about, this year. After declining for two straight years it was flat this year.
Meanwhile, the shifting size of mid-stage VC deals meant there is a perfect storm building.
The average deal size in Series B and Series C, comprising the mid-stage of VC funding cycle, which has been stuck at the $5 million and $10 million bracket for the last five years, climbed up concurrently this year with average size doubling at both the levels to around $10 million and $20 million levels, respectively.
Some VC firms are getting polarised towards seed and pre-Series A stage of fundraising cycle while some are having to tweak strategy as hedge funds are pushing through to take a pie of late-stage VC funding space.
The number of angel and seed investments in startups, which typically come in as the first round of external funding for new ventures, was another exception with both volume and value of announced investments rising this year. There were around 285 angel/seed deals this year. Many of the new age entrepreneurs whose ventures have raised one or more rounds of VC funding themselves turned investors, thereby expanding the pool of angel investors to support the startup ecosystem.
Indeed, angel/seed investments were the single biggest driver of private investment transactions this year marginally surpassing PE deals.