Mumbai : Rapidly becoming an influential market for mergers and acquisitions (M&As) in Asia-pacific region, India hit a record level in this space with 388 deals worth $64.5 billion during 2016, said a report.
Deal value surged 90.5 per cent, while deal count fell slightly to 388 from 421, during the last year compared to 2015, according to global deal tracking firm Mergermarket, reports PTI.
Significantly, the country’s market share in total M&A deals in Asia-Pacific stood at 8.8 per cent last year – the highest since 2007 (9.4%) and significantly more than the 3.6 per cent logged in 2015.
“India’s M&A activity in 2016 reached the highest annual value on Mergermarket record (since 2001) with 388 deals worth $ 64.5 billion,” the firm said in the report. “The top three deals targeting India in 2016 amounted to $20.6 billion, accounting for 32 per cent of the total value of M&A in India,” the report said. Sectoral analysis by Mergermarket for 2016 showed that energy, mining and utilities replaced financial services as the most active sector with deals totalling $17.1 billion – almost three times more compared to 2015.
The energy, mining and utilities sector account for 26.5 per cent share in total M&A deals which was largely
fuelled by Essar Group selling a combined 98 per cent stake in Essar Oil to both Rosneft and Trafigura for a combined value of $ 12.7 billion.
Telecommunication deal value rose nearly 5 times to reach $13.6 billion from $2.5 billion in 2015. Merger market noted that the upcoming spectrum auctions in telecom are expected to increase competition that could subsequently spark a pricing war involving new entrant, Reliance Jio, and could further fuel growth in the sector. “Large industry players will need to prepare for the auction by selling non-core assets and deleveraging their balance sheets,” the report added.
power and toll roads are likely to contribute further in M&A space in 2017, depending on the upcoming Union Budget. Technology accounted for just 56 deals, down from 89 in 2015 — the largest drop in deal count across all sectors. However, the report said technology has the potential to improve in 2017 but is unlikely to reach the heights seen in 2015 when the sector was ranked the busiest sector by deal count and second most active by value (89 deals, USD 5.4 billion) as investors wait for a further easing towards more realistic multiples and valuations. Total inbound activity in India’s M&A in 2016 reached record high with 176 deals amounting to USD 30.8 billion — 62.3 per cent jump over USD 19 billion in 2015. US investors maintained their lead, investing in 58 deals worth USD 4.8 billion. “The Government’s ‘Make in India’ policy has created a more favourable investment environment for foreign firms, especially in manufacturing and chemicals sector,” the report said.
Meanwhile, private equity (PE) buyout value rose for the third consecutive year, hitting a record USD 12.6 billion. In terms of deal count, 90 acquisitions were made by PE last year — second highest for a year since 117 deals in 2015. The report found that foreign private equity houses played an increasingly important role across Indian deals as 91.8 per cent of the total USD 12.6 billion was represented by foreign PE firms, and more than seven in every 10 deals involved a foreign sponsor.
