The Hindu Business Line : India Inc’s outbound M&As on the rise

Hyderabad, Dec. 8 The volume of overseas mergers and acquisitions (M&As) by India Inc has grown phenomenally in the first half of the current fiscal and is likely to reach further heights over the next one year.

In the fiscal year 2006, the outbound M&As from India had an aggregate value of $13.97 billion spread over 480 deals. However, the M&As in the first half of the current fiscal surpassed this figure and stood at $25.58 billion, according to the data available with KPMG.

“The average ticket size of these outbound M&A deals from India had also been growing from $25 million in 2005 to $39 million in 2006,” Mr Preet Mohan Singh, Director (Corporate Finance), KPMG India Pvt Ltd, told the delegates at a panel discussion on ‘Indian M&A activity: Innovations and challenges’ at Indian School of Business (ISB) here on Saturday.

Key drivers

The key drivers behind this growth are increasing global consolidation, cost of production and valuation arbitrage, customs/skill set acquisition.

“Above all capital markets in India now tend to view cross-border acquisition behaviour positively. This is fuelling outbound M&As from India,” Mr Singh explained.

On the flipside, Indian corporates should be wary of an exaggerated sense of potential synergies, deal financing difficulties and challenges pertaining to the post-merger operation and financial integration, he pointed out.

According to Mr Raj Chatterjee, Director, M&A Motilal Oswal Investment Banking, a noteworthy trend in M&As was the wide gulf between the large companies and the mid-size firms.

“An average Indian corporate CEO is not trained to implement a merger or take over,” he observed.

However, the broad market perception of Indian companies outside India was positive as far as overseas acquisitions were concerned, he added.

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India Inc’s outbound M&As on the rise