M&A activity up 125% with deals worth $32.5 billion

The September quarter witnessed M&A deals worth $16.6 billion as against $5.7 billion in the corresponding period in 2015


Photo: Reuters
Photo: Reuters

Mergers and acquisitions (M&A) in India more than doubled in terms of value during the nine months ended 30 September, helped mainly by large deals, with the third quarter recording the highest deal values, shows a report by consulting firm KPMG.

The September quarter witnessed M&A deals worth $16.6 billion as against $5.7 billion in the corresponding period in 2015, KPMG said in a report titled The Indian M&A landscape—an overview.

In the first nine months of 2016, M&A activity rose 125% with 445 deals worth $32.5 billion compared with $14.5 billion worth of deals in the same period a year earlier.

“Sentiment on deal street remains strong and the recent passing of the GST (goods and services tax) regulations of and the insolvency law adds to the optimism that the government is very keen to push through reforms,” said Vikram Hosangady, head of deal advisory and private equity, KPMG India.

Among the biggest deals concluded during the nine-month period was Ahmedabad-based detergent and soap maker Nirma Ltd’s acquisition of Lafarge India’s cement business for $1.4 billion (about Rs 9,478 crore), including debt.

Shanghai Fosun Pharmaceutical Group Co. Ltd bought an 86% stake in Gland Pharma, backed by KKR & Co. Lp, for up to $1.3 billion.

UltraTech Cement Ltd, a unit of the Aditya Birla Group, agreed to buy Jaypee Group’s cement assets for a total enterprise value of Rs16,189 crore.

As per a sector analysis, telecoms with $9.4 billion, infrastructure with $7.8 billion and financial services with $7.6 billion have attracted the most interest so far this year.

Investments in e-commerce were tempered this year, while the financial technology space saw increased interest.

Private equity investments grew 22% with 571 deals as compared with 469 deals in the same time period in 2015.

“We expect this renewed optimism to lead to private investment which should fuel deal activity for growth capital, something that was absent for the last 2-3 years. Deal activity currently remains dominated by private equity investees who are resorting to secondary deals/sale to strategics. Interestingly, we are seeing more control situations develop as promoters look to exit businesses to pursue other interests or forced sales driven by leveraged balance sheets,” said Hosangady.

But there was a decline in terms of deal value by 26% to $11.5 billion from $15.4 billion in the year-ago period.

Inbound investments in the country rose 64% by deal value from the same period in 2015. Investments by Indian companies abroad rose 10%. Deal activity was seen primarily in sectors such as information technology, pharmaceuticals, energy and natural resources, the report said.

According to Hosangady, financial year 2018 and 2019 are expected to be very strong years including increased outbound action, especially in the pharma and technology sectors.

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