Mumbai: It’s been a blockbuster year so far for mergers and acquisitions (M&A) in India with the total transaction value crossing the $100 billion-mark, led by corporate acquisitions, as well as private equity-led buyouts. In an interview with Mint, Raj Balakrishnan, head of India Investment Banking, Bank of America Merrill Lynch (BofAML), lays down the expectations for next year and the company’s M&A plans for corporate India. Edited excerpts:
How has the year been for you in terms of deal flow?
This year has been a good one for us. We were part of some of the largest M&A and fund-raising transactions in India. We recently announced Unilever’s acquisition of GSK’s health food drinks business—the largest deal in India’s consumer sector, in which we advised Unilever. We also advised Schneider Electric on the acquisition of L&T’s electrical and automation business and worked for Actis Llp on its sale of Ostro Energy to ReNew Power—both deals being the largest transactions in the respective sectors in India. We also closed the Vodafone-Idea merger, in which we were one of the advisors to Vodafone. We also helped Generali increase its stake in Future Generali India Insurance Co.
What will be your key focus area in 2019 and how do you read the impact of Lok Sabha elections on India-bound investments?
Our strategy is to continue working with our key clients on marquee transactions, both in India and globally. We call this a “responsible growth" strategy. We don’t aspire to be a part of every deal on the street. This helps us stay focused on key clients and have a large share of the big ticket transactions with them. We remain cautiously optimistic on both M&A and capital raising. Of course, a lot will depend on the political environment. Depending on the outcome of the state elections, there might a window available in the first quarter next year for fund-raising. And assuming there is a stable government at the Centre after the general elections, I see business activity in India taking off.
A number of assets are on the block as many corporate groups are looking to exit non-core businesses. How are strategic buyers and buyout funds looking at this?
I would term this as a healthy churn in portfolios. Big corporates have multiple business lines within their business and they constantly re-evaluate each of these lines. This churn of portfolios will continue as a broader theme. Corporates will enter new businesses and exit a few that are not core to their strategy. For instance, strategic investors such as Unilever and Schneider look at India selectively, and for quality assets. For such assets, there is no paucity of either buyers or funds.
Buyout funds will continue to be very active as they have a lot of capital to deploy. The deal sizes that they consider globally and in India have gone up enormously. That is why I wouldn’t be surprised if some big buyouts get done in 2019.
And what is the outlook for 2019? Do you think that markets will still be open for exits?
The first half of the year was extremely good for the capital markets, but since then, the market has slowed down, especially in the second half, and particularly more on the debt side, because of the rates and currency volatility. But by and large, I feel that investors will continue to view the Indian market positively.
Barring some kind of major political uncertainty in India or some negative global event, I think we should continue to see constructive markets.