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Suresh P. Iyengar

Mumbai, Dec. 24 Merger and acquisition (M&A) deals and private equity investments in 2008 suffered a major setback in line with the financial crisis and global economic slowdown.

The total value of deals (M&A and PE) announced in the calendar year 2008 (till December 15) dropped 41 per cent to $41.13 billion against $70.14 billion in 2007, according to Grant Thornton’s preliminary Annual Deal Tracker for 2008. The number of deals also dipped 25 per cent to 751 in 2008 against 1,000 in 2007.

On the back of sharp decline in valuations of companies amid the recent meltdown in the capital market, the value of cross-border deals reduced 47 per cent in 2008. The value of inbound deals fell to $12.48 billion from $15.50 billion in 2007, while outbound deals plunged from $32.76 billion in 2007 to $13.15 billion in 2008.

However, of the $32.76 billion outbound deals in 2007, $18.20 billion was from Tata-Corus ($12.2 billion) and Hindalco-Novellis ($6 billion).

In 2008, there were 445 M&A deals with an announced value of $30.72 billion against 676 deals valued at $51.11 billion in 2007.

Of the total cross-border deals, there were 193 outbound deals (Indian companies acquiring businesses overseas) valued at $13.15 billion and 81 inbound deals (international companies buying into India) with an announced value of $12.48 billion. The average M&A deal value was $69.03 million in 2008 against $93.55 million.

There were 171 domestic deals (both acquirer and target being Indian) with an announced value of $5.09 billion and 274 cross-border deals with an announced value of $25.63 billion. Daiichi-Sankyo’s step acquisition of Ranbaxy for $4.5 billion was the largest deal in 2008. Telecom with $5.8 billion investment and pharma, healthcare and biotech combine $5.5 billion investment garnered the maximum investment. Together, they accounted for 37 per cent of the total M&A deal this year.

The other sectors which hogged the limelight include banking and financial services and IT & ITeS accounting for 11 per cent and 10 per cent.

The top 10 deals accounted for more than 64 per cent of the total M&A deal value in 2008, while in 2007 the top 10 deals accounted for more than 73 per cent of total deals.

Interestingly, most of the top 10 deals in 2008 were cross-border in nature (five outbound deals and four inbound deals).

PE deals in 2008 numbered 306 amounting to $10.42 billion against 405 deals valued at $19.03 billion in 2007 due to the recent economic downturn. Ms C.G. Srividya – Partner, Specialist Advisory Services said, “Considering that private equity investors typically peg the valuations to stock markets, there is currently a valuation gap in expectations between investors and companies. However, this should get bridged once the markets stabilise and we expect the momentum to pick up again in the medium term.”

The top 10 PE deals accounted for more than 29 per cent of the total PE deal value in

2008. Providence Equity Partners investment in Aditya Birla Telecom for $640 million was the largest PE investment in 2008 followed by Symphony Capital’s $450 million in DLF Assets.

The highest proportion of PE investment was made in the real estate and infrastructure and telecom sectors amounting to $3.3 billion and $1.4 billion, respectively.

More Stories on : Corporate | Mergers & Acquisitions | Financial Markets

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