Mumbai: 2017 was a blockbuster year for merger and acquisition (M&A) activity in India with deal values increasing by 53.3% to $77.6 billion, compared with $50.6 billion in 2016. Deal volumes rose by 2.5% to 614 deals in 2017 compared with 599 deals the previous year. 

Of the 614 deals, 325 were completed, accounting for $24.88 billion, Bloomberg data showed. 

In terms of target industry, the communications sector witnessed 42.7% of deal activity, worth $33.17 billion across 65 deals, followed by the energy sector with a 21.34% share and $16.57 billion in deal value. The industrial sector accounted for 10% of deal activity worth $7.8 billion and the financial services sector for 9.5%, clocking $7.36 billion in deal value. 

In 2017, the top five M&A deals accounted for 57% share, registering $44.3 billion in value. 

Among the top deals were Bharti Enterprises Pvt. Ltd’s acquisition of a stake in Bharti Airtel Ltd for $16.7 billion from Indian Continent Investment Ltd; the merger of Vodafone India Ltd and Idea Cellular Ltd, valued at $12.7 billion; the proposed acquisition of Hindustan Petroleum Corp. Ltd by Oil and Natural Gas Corp. Ltd for $8.5 billion; Adani Transmission Ltd acquiring Reliance Infrastructure Ltd’s Mumbai power business for nearly $3 billion; and IndusInd Bank Ltd’s merger with Bharat Financial Inclusion Ltd, which was valued at $2.3 billion.

In terms of deal type, cross-border transactions accounted for nearly 58%, with a combined value of $45 billion across 235 deals.

While buyouts accounted for 42.6% of deals with a $33 billion valuation, additional stake buys accounted for 24.7% share and $19.2 billion in value. Industry experts believe that while the deal momentum will continue in 2018, there will be several factors to watch out for.

“First, the focus will clearly be domestic markets, unlike overseas acquisitions. The India growth story has never been so attractive and is requiring greater capital allocation; remaining focused on India is clearly on top of the agenda for most corporates," said Ajay Garg, managing director and founder of Equirus Capital. 

“The competition for most M&A deals will be private equity investors, who have an attractive proposition for the existing management team in terms of options/equity upside," said Garg. 

“Also, regulatory approvals is a big factor in any M&A strategy, starting from Sebi (Securities and Exchange Board of India) wanting to ensure minority shareholders are protected, Competition Commission approval and all sectoral regulators looking at which sort of players and resultant business models emerging, we are going to see far higher timelines and uncertainty for M&A transaction consummation," Garg added.