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Mumbai: Merger and acquisition (M&A) activity in India halved in value this year from 2018, reflecting fewer billion-dollar deals, according to consulting firm PwC India.

The year so far saw 765 deals worth $37 billion, according to PwC’s Deals in India: Annual Review And Outlook for 2020 report. It said there were only 11 deals valued at over $1 billion each in 2019, compared with 2018 which saw 25 mega-deals with the highlight being Walmart Inc.’s $16 billion acquisition of Flipkart.

Challenging global macroeconomic factors such as the US-China trade war contributed to the slowdown in deal activity as investors took a cautious approach.

Despite the subdued global mood, M&A deals by foreign firms saw an uptick with inbound deal activity making up 32% of M&A deal value this year, an increase from last year’s value of 28%.

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“India has witnessed significant interest from overseas corporates across sectors including Steel, Energy, Infrastructure and Financial Services," the report said. It said inbound activity totalled around $12 billion this year compared with 2018 which saw deals worth $22.4 billion, including the Walmart-Flipkart deal.

Despite the challenges, foreign players are evidently still bullish on India and eager to take part in the opportunities India presents, it said. “However, this enthusiasm in the near future would be dependent on both domestic and global volatility as well as government reforms," the report added.

On the private equity (PE) front, investors were seen chasing control transactions or buyouts, with such deals witnessing record high activity this year. “Control has become a key element in most transactions. Investors are increasingly looking for investment opportunities where they can enhance or extract maximum value," PwC said in its report.

This year, however, saw record buyout activity, surpassing 2018 by 30% in value. There were 45 buyout deals totalling nearly $12 billion in 2019. “Investors are now more keen to play a role in the performance of their investments, to be able to extend their expertise and work towards the profitability of the company. Control transactions eliminate governance concerns and the need to align with other shareholders in terms of operational aspects and very often prove to be more beneficial and convenient to the investor," the report added.

Apart from governance related issues, buyouts are also being driven by factors such as consolidation and deleveraging.

This year also saw the largest PE transaction so far with Canadian asset manager Brookfield’s $3.7 billion buyout of Reliance Tower Infrastructure Trust surpassing the record set by SoftBank when it invested $2.5 billion in Flipkart in 2017.

With buyouts at an all-time high, platform deals are also gaining traction, according to PwC. “A number of investors are moving towards a more concise or focused investment approach and accordingly adopting a buy and build approach. We are seeing platform deals across multiple sectors including infrastructure, renewables, technology and also debt situations," the report said.

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