The Hindu Business Line : Auto sector riding high on M&A, PE deals

New Delhi, July 15 Tata Motors’ acquisition of Jaguar-Land Rover inflated the mergers & acquisition basket of the domestic automobile industry during January-June 2008, with the sector witnessing fewer, but high value deals.

The number of M&A deals struck by the domestic automobile companies stood at nine, with a combined value at $2,390 million. This is almost half the number of deals that were clocked in the same period last year. In 2007, the sector witnessed 18 deals worth $515.51 million, according to a Grant Thornton report.

Major ones

While Tata Motors emerged the front runner in terms of value, Mahindra & Mahindra with its three Italian acquisitions – G R Grafica Ricerca, Metalcastello and Engines Engineering – scored higher in number of deals. J K Tyres and Industries’ acquisition of Mexican company, Tornel for $67 million, Daimler AG’s 26 per cent stake in Sutlej Motors and Carburettors increasing its stake in the same proportion in UCAL Fuel System boosted the M&A kitty in January-June 2008.

“There has been a shift in the automotive industry’s strategy from pursuing the organic route to globe trotting for acquisitions to penetrate the newer market and leverage its cost advantage,” said Ms C.G. Srividya, Partner, Specialist Advisory Services, Grant Thornton.

PE Deals soar

A similar trend persisted in private equity deals, with the first six months of 2008 seeing four deals for $ 221 million as against an equal number of deals at $ 75 million in the same period last year.

The prominent PE deals during the first half of 2008 include Goldman Sach’s arm, Golbot Holding 3.68 per cent stake in M&M for $175 million, AIG Global Investment’s $20 million in Uniparts, AIG’s 14.50 per cent in Kinetic Engineering and Phi Advisors’ 10 per cent in M&M’s subsidiary First Choice.