The Hindu Business Line : KPMG reports upsurge in Indian M&A activity

WHILE the worldwide mergers and acquisitions analysis reveals that deals worth $671 billion were completed in 2005, which is a fraction less than the $675 billion closed in the first half of 2004, the Indian scenario shows an upsurge.

During the first half of 2005, the total value of global activity is forecast to reach $771 billion, a 14-per cent increase over the same period last year.

The Country Managing Director of consultancy firm KPMG India, Mr Ian Gomes, in a statement said, "Although the numbers have not matched the most bullish predictions, the level of activity is consistent with the current backdrop. This is characterised by stable capital markets but on-going fragility in corporate confidence."

The M&A activity in the Indian market in the first half of 2005 is higher than that in the corresponding previous period with 167 deals completed till the beginning of June 2005 compared to 137 deals in the first half of 2004.

However, deal values were marginally higher at $3,590 million.

The highest deal value in the first half of 2005 was $810 million - significantly higher than $378 million last year from Holcim's acquisition of a 67-per cent stake in Ambuja Cement.

Nearly 50 per cent of the deals was in industrial manufacturing (12 per cent). This was followed by the acquisition of ACC as well as Tata Steel's overseas acquisition of Singapore-based NatSteel.

Deals in telecom, which dominated the previous year, were few and far between. About 16 per cent of M&A activity was in the banking, finance and insurance sectors. There were 31 outbound M&As in the first half of 2005 compared to 38 in the whole of 2004.

The house of Tatas made spearheaded outbound deals, other than their NatSteel acquisition.

Their other cross border acquisitions included VSNL's acquisition of Tyco International's fibre optic cable assets (in the US), Tata Chemical's acquisition of 33 per cent in Indo Moroc Phosphore, Morocco, Tata Motor's acquisition of a stake in a Spanish company and Indian Hotels' acquisition of Four Seasons, New York.

Deals by financial sponsors now account for 13 per cent of the world's M&A by value compared to 2 per cent in 2000. India witnessed 22 private equity deals aggregating $272 million.

The industry focus has shifted from IT and media to the manufacturing industry.

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