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Tuesday, October 19, 2010

Indian M&A activity on the rise (April to Sept 2010)

The Indian Mergers and Acquisition scenario started with a bang in 2010 with Indian companies announcing M&A deals valued at an impressive USD 14bn in just the first 45 days. In contrast, corporate India was involved in M&A transactions worth only USD 11.9bn.in the previous year 2009, when the worldwide economic slowdown forced Indian companies to look within the boundaries of the nation for merger and acquisitions deals. Domestic deals had accounted for more than 60% of the total USD 11.9bn worth of deals last year. But now, the drift seems to be changing as more and more domestic companies are venturing out and have announced a number of multi million dollar international acquisitions like the USD 9bn Bharti-Zain deal, which happened in March this year.
As per ISI Emerging Markets data base, a total of 220 M&A deals were announced with a total deal value of over USD 28.56bn in the first six months of the financial year 2010 (April to September).
Out of these 91 were domestic deals amounting to a deal value of USD 14bn, 40 were outbound deals where Indian companies acquired a foreign target (deal value USD 5.9bn) and 85 inbound deals saw Indian companies being acquired by foreign firms (deal value USD 7.9bn).
The biggest deal in the first 2 quarters of financial year 2010 was, Vedanta Resources Plc, the UK-listed metals and mining company agreeing to acquire between 51% and 60% in Cairn India, the listed Indian oil and Gas Company. But the deal is currently stuck up in red tape, with Cairn needing at least 10 separate clearances from the petroleum ministry before it can close the deal.
Sector wise analysis:

A sector wise analysis shows that the Oil and Gas sector accounted for 31 per cent of the total M&A deal value while telecom accounted for 13 per cent.
Electric power generation was the third most-active sector, as it contributed 12 per cent in deal value for the first two quarters of financial year 2010.

Month wise analysis
The month of September saw the maximum number of M&A deals (50 deals), but as deal values for many transactions in that month were not disclosed, the total deal value for September was USD 3.47bn.

The month of August saw the highest aggregate deal value of USD 11.63bn, which was because of the USD 9bn Cairn-Vedanta deal.
The rise in the number of outbound deals provides clear proof that corporate India is consolidating and at the same time aggressively working on global expansion. As global economy continues to recover from recession blues, I believe that interest in outbound activity will continue as Indian companies target global expansion to boost both growth and resources, with a focus on medium sized deals. However, it will still take some time before corporate India can mirror the peak deal activity levels of 2007-08.
Notes: Includes deals announced in the period of April-September 2010. Includes joint ventures, acquisition of minority stakes & restructuring deals
Source: ISI Emerging Markets Database

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