Mumbai: Mergers and acquisitions (M&As) witnessed a sharp jump in value terms in the second quarter of calendar 2018, growing 6.8 times to $34.8 billion from a year earlier on the back of Walmart’s acquisition of Flipkart, according to a report by consulting firm EY.

In May, Walmart acquired a 77% stake in Flipkart for $16 billion, accounting for 46% of the total disclosed deal value.

The second quarter of last calendar year had witnessed M&A deals worth $5.1 billion.

The June quarter also witnessed a 19% growth in the number of deals, with 273 M&A transactions being reported.

Financial services recorded the highest number of deals with a total of 39 transactions worth $1.1 billion, followed by consumer and retail sector with 30 deals worth $16.5 billion.

Other sectors such as telecom (two deals worth $5.4 billion), diversified industrial products (23 deals worth $2.9 billion) and metals and mining (six deals worth $960 million) also clocked substantially high deal value as well, the report said.

“M&A activity is expected to stay positive in the coming quarters, on the back of continued interest of financial and strategic investors in the Indian market," said Amit Khandelwal, managing partner, Transaction Advisory Services, EY.

Restructuring deals will remain active in the coming months as cleaning up bad loans is a major priority for banks, he said.

“Furthermore, the successful resolution of certain cases recently, with healthy recovery rates under the Insolvency and Bankruptcy Code (IBC), along with the implementation of project ‘Sashakt’, will further add to the pipeline," added Khandelwal.

Cross-border M&A activity in the second quarter touched a record high as inbound deal value touched a total of $23.2 billion across 69 deals on the back of the Walmart-Flipkart deal.

Even after excluding the Walmart-Flipkart deal, inbound activity remained strong with 68 deals worth $7.2 billion.

The US continued to be the most active cross-border M&A partner for Indian companies during the quarter, with a total of 26 deals (18 inbound and eight outbound deals). Japan, the UK and the Netherlands emerged as other key partners with investments across sectors.

The domestic landscape witnessed 170 deals with a disclosed deal value of $10.6 billion compared with 152 deals with $1.8 billion in the same quarter last year.

“The transition of India’s economy towards a formal structure, coupled with healthy deal market fundamentals and the authority’s commitment to the IBC, should support deal-making in the short-term. On the cross-border front, we expect inbound activity should carry the momentum in the coming months, while a sense of caution can prevail on the outbound front," the report added.

While the resolution process of stressed assets can witness certain challenges such as differences over valuations and lack of interest, especially in old or poor quality assets, the overall environment looks positive, given the successful resolution of certain stressed assets recently and continuous regulatory support, the report added.

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