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M&As were toast of season for India Inc in 2007

M&As were toast of season for India Inc in 2007
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First Published: Wed, Dec 19 2007. 10 55 AM IST
Updated: Wed, Dec 19 2007. 10 55 AM IST
New Delhi: India’s corporate honchos spent a considerable time and energy this year at deal tables and executed over thousand transactions involving sale or purchase of equity stakes in their companies.
On an average, every single day of 2007 saw about three deals being announced. This included a total of 1,047 merger and acquisitions as well as private equity deals for a total value of $68.32 billion dollars (about Rs2,75,000 crore).
Besides, some deals such as the sale of Ford Motors’ Jaguar and Land Rover brands involving approximately $2 billion, for which home-grown Tata and Mahindra groups have emerged as front-runners, may be concluded soon.
But, the appetite for such deals is expected to continue and possibly grow in 2008.
“This space would witness a lot of action in the coming year. The momentum will continue with the number of deals next year most likely to surpass this year’s figure,” consulting firm Grant Thornton’s M&A advisory head Pankaj Karna told PTI.
The only possible dampener could be the Competition Bill, which seeks to examine all large-size deals, Grant Thornton Partner (Corporate Advisory Services) Harish H V said.
Interestingly, shopping for companies abroad emerged as the toast of the season with the value of foreign acquisitions by Indian companies exceeding that of inbound acquisitions as well as overall FDI coming into the country during 2007.
India Inc spent $32 billion for its overseas M&A deals, against $15 billion bill footed by foreign firms for acquisitions in India and an estimated $16 billion of foreign direct investment.
Experts expect foreign flavour to get even stronger when it comes to executing deals by Indian companies.
“I would anticipate the contribution of cross-border deals at a little below 90% in 2008,” PricewaterhouseCoopers’ Executive Director Sanjeev Krishan said.
The surge in deal value and volumes to record-high levels is seeing Indian companies expand their horizons both in terms of business activities and target markets across the global scale.
“Aided by healthy bottomlines and relatively easier credit lines, M&A activity is currently being used as a tool to quickly ramp up operations and reach desired levels of turnover and market capitalisation,” Krishan said.
“The new and heightened deal activity is a sign of M&A becoming a key element of strategy for India Inc. There is strong growth in cross-border deals, as India Inc is going with gusto across the world buying up companies,” Grant Thornton’s Harish said.
Moreover, Indian companies are going about with their international acquisitions on their own, unlike Chinese whose deal sizes are bigger but they come with a significant push and support from the government, Harish noted.
Besides, the experts also foresee significant rise in domestic M&A deals.
“The area where we have not seen much growth is domestic M&A. There is a clear case for growth in M&A in the domestic market to drive consolidation,” Grant Thornton said.
In 2007, there were 348 cross-border deals worth about $48.34 billion, as against 313 domestic deals, wherein both buyer and target compaies were Indian, worth just 2.83 billion dollars. Experts expect foreign flavour to get even stronger when it comes to executing deals by Indian companies.
“I would anticipate the contribution of cross-border deals at a little below 90% in 2008,” PricewaterhouseCoopers’ Executive Director Sanjeev Krishan said.
The surge in deal value and volumes to record-high levels is seeing Indian companies expand their horizons both in terms of business activities and target markets across the global scale.
“Aided by healthy bottomlines and relatively easier credit lines, M&A activity is currently being used as a tool to quickly ramp up operations and reach desired levels of turnover and market capitalisation,” Krishan said.
“The new and heightened deal activity is a sign of M&A becoming a key element of strategy for India Inc. There is strong growth in cross-border deals, as India Inc is going with gusto across the world buying up companies,” Grant Thornton’s Harish said.
Moreover, Indian companies are going about with their international acquisitions on their own, unlike Chinese whose deal sizes are bigger but they come with a significant push and support from the government, Harish noted.
Besides, the experts also foresee significant rise in domestic M&A deals.
“The area where we have not seen much growth is domestic M&A. There is a clear case for growth in M&A in the domestic market to drive consolidation,” Grant Thornton said.
In 2007, there were 348 cross-border deals worth about $48.34 billion, as against 313 domestic deals, wherein both buyer and target companies were Indian, worth just $2.83 billion.
The cross-border M&A deals included 240 transactions where Indian companies acquired businesses abroad and 108 inbound deals where foreign companies bought in India.
In total, there were 661 M&A deals with a total value of $51.17 billion in 2007, up from 480 deals worth $20.30 billion in the previous year.
This excluded 386 private equity deals worth $17.14 billion, which also rose considerably from 302 deals worth just $7.86 billion in 2006.
However, while the M&A fever has started gripping the entire Indian industry, some of the large players are still dominating the deal alley in terms of size of moneybags.
Tata’s Corus takeover, Vodafone’s purchase of controlling stake in Hutch-Essar and Hindalco’s Novelis acquisition together accounted for 60 per cent of the total value of cross-border M&A deals in 2007.
Tata-Corus deal, which was recently named among the world’s ten best deals for 2007, was the largest M&A transaction involving an Indian company in 2007 with a deal value of $12.2 billion, according to Grant Thornton.
It was followed by Vodafone’s $10.83 billion takeover of a controlling stake in Hutch Essar and Hindalco’s six billion dollar acquisition of North American aluminium firm Novelis.
The other major M&A deals included Suzlon-REpower, Essar Steel’s Algoma acquisition, United Spirits’ Whyte & Mackay takeover, purchase of a significant stake in an Indonesian coal mines by Tata Power and Vedanta Resources’ Sesa Goa takeover.
Across sectors, IT and ITeS was the most active in terms of number of deals (154), followed by pharma (62), banking (58) and media and entertainment (33).
In terms of deal value, steel accounted for the maximum 29%, followed by telecom (22%), aluminium (12%) and power and energy (7%).
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First Published: Wed, Dec 19 2007. 10 55 AM IST
More Topics: Deals | Corporates | Mergers | Acquisitions | Growth |