Domestic M&A deals on the decline: study

Domestic M&A deals on the decline: study


Mumbai: Although cross-border mergers and acquisition (M&A) deals hit a new high during 2007, the value of domestic M&A deals was on the decline during the year, according to a study done by consultancy firm Grant Thornton.

The value of domestic deals has fallen from $6.9 billion in 2005 to $4.99 billion in 2006 to $2.83 billion in 2007, even though the volume of domestic deals has increased from 151 deals in 2005 to 214 in 2006 to 313 deals in 2007, the study said.

The number of domestic deals — where both acquirer and the target company is Indian — has gone up but they were of small value.

According to Grant Thornton, there were a total 661 M&A deals during the year (up to 15 December) worth $51 billion. But 348 cross-border deals — Indian companies acquiring foreign companies and foreign companies making acquisitions in India — accounted for bulk of the share at $48 billion.

Harish HV, partner, corporate advisory services, Grant Thornton, said, “There is a clear case for growth in M&A in the domestic market to drive consolidation. We expect this to change significantly in the New Year which will be of significant benefit to the economy and the market."

The possible dampener to domestic deals, according to him, could be the Competition Bill which seeks to examine all large M&As. The definition of size is too narrow and the time frame for response is too long. “There is a clear case for reviewing large deals which result in monopolies or significant concentration but not all deals fit that definition," he said.