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Private Equity and M&A activity hits three year high...

...as investor interest in India increases

Despite a slow start to 2014, resurgence of deal activity in the second quarter followed India Inc’s expectations of economic growth returning post the general elections according to Grant Thornton UK LLP's India Watch.   

Mergers and Acquisitions (M&A) and Private Equity (PE) activity in 2014 hit a three year high, with M&A contributing close to US$38 billion from 573 deals, and PE contributing $12bn from 604 deals, activity up 23% in deal value and 34% in deal volume compared with 2013.

A clear mandate from India's new government provided further momentum which sustained through the year leading to 1,177 deals, the highest ever in a decade, worth over US$ 50 billion.

Domestic deals largely rode on the consolidation bandwagon with Sun Pharma acquiring Ranbaxy, Kotak merging with ING Vysya, Flipkart looping in Myntra and a few large power sector mergers and acquisitions. 2014 also witnessed one of the lowest levels of outbound M&A by deal values at just US$ 6 billion, although volumes remained robust at 117 deals.

Overseas investors continue to tap the potential in Indian markets resulting in 35% increase in inbound values compared to 2013 and 19% increase in volume of deals.

IT&ITES sector was the largest contributor to M&A by deal value in 2014 followed by Pharma & Healthcare sector and Telecom. Based on volume of deals, IT & ITES continues to top the charts followed by Manufacturing and Pharma.

For PE, IT & ITES sector took the lead largely driven by the e-commerce sector, raising about US$4 billion from over 100 deals, contributing over 30% of overall deal value. Other key sectors were real estate and infrastructure with over US$2.4 billion, and BFSI contributing over US$1.4 billion.

Table I: Deal summary for Indian M&A and PE activity for 2012 – 2014.

Deal Summary- YTD

Volume

Value (USD mn)

 

2012

2013

2014

2012

2013

2014

Domestic

233

218

253

6,088

5,636

16,316

Crossborder

262

221

283

14,507

17,985

17,809

Merger & Internal Restructuring

100

58

37

14,789

4,541

3,989

Total M&A

595

497

573

35,384

28,162

38,114

Private Equity

401

450

604

7,378

10,007

12,358

Grand Total

996

947

1177

42,761

38,169

50,472

  Cross border includes

           

Inbound

140

139

166

5,955

8,736

11,829

Outbound

122

82

117

8,552

9,249

5,981

Table A: deal summary for M&A and PE looking at volume and value for 2012 to 2014

Commenting on the increase in Private Equity and M&A activity, Anuj Chande, Partner, Corporate Finance and Head of South Asia Group Grant Thornton UK LLP, said: “2014 was an important year in many aspects for India Inc. After a rather cautious start to the year, we witnessed an unleashing of deals from the second quarter. We saw the year ending on a high note, with US$50 billion worth of deals, the highest since 2011.

"We expect 2015 to benefit from a combination of stable government, significant reforms, falling commodity prices and minority foreign investors increasing control of their investments, all of which should continue to drive deal activity across all sectors."