Domestic deals apace with 58 per cent jump in value
Overall mergers & acquisition (M&A) activity in the country is off to a slow start this year, largely because of the absence of mega-transactions such as the Reliance-BP deal ($9.0 billion) of early 2011.
The value of announced M&A deals involving India fell 35 per cent to $18.1 billion in the first half of 2011, according to a Thomson-Reuters survey.
Adverse global and domestic factors have led to a 57 per cent drop in M&A volumes to $5.4 billion in the April-June quarter, from $12.7 billion in the first quarter of 2012.
The average size of disclosed deals declined to $76 million against $91.9 million in the first half of 2011, even as a majority of India’s M&A transactions fell below the $1 billion mark.
The materials sector dominated with a 29 per cent share of India-involved acquisitions worth $5.3 billion – up 36 per cent from the first half of 2011. The largest deal in the country this year was the merger of Sesa Goa with Sterlite Industries, a deal valued at $3.9 billion.
As part of Vedanta’s restructuring move, Vedanta Aluminum and Madras Aluminum will also be consolidated into the new merged entity called Sesa Sterlite with a combined estimated value of $4.1 billion. There was a significant rise in deal value in Media & Entertainment and Telecoms.
Domestic M&A rises
However, domestic M&A activity saw the highest semi-annual start in deal value since 2010. At $7 billion in the first half of this year, it was up 58 per cent compared to the first half of 2011 ($4.4 billion). The bulk of the domestic activity was focused on the financials, followed by high tech and telecom sectors.
Inbound BRIC M&A activity announced 829 deals worth $39.7 billion, where India accounted for 20 per cent ($8.1 billion), a loss of 5.9 market share points compared to the first half of 2011. China saw the highest number of inbound deals among the BRIC nations but captured only 24.2 per cent market share. Russia and Brazil led with 29 and 26 per cent market share, respectively.
Private Equity-backed M&As targeting Indian companies dropped 65 per cent with 68 announced deals valued at $1.4 billion. Financials accounted for 33 per cent with $ 466.8 million (down 69 per cent from the last year), while the healthcare sector saw a substantial increase this year pushing deal value to reach a record half-year volume of $ 290.4 million.
Globally, the UK accounted for the highest value of inbound acquisitions with 53.2 per cent market share ($4.3 billion). Overtaking the US, Japan accounted for 14.6 per cent ($1.2 billion). Japan also doubled its Indian acquisitions during the second quarter of 2012 to $830.1 million from $353.0 million in the first quarter. The US, which had the most number of M&A transactions, captured 12.8 per cent share with 39 deals worth $1.0 billion (down 67 per cent from H1 2011).
Outbound M&A Weakens
Indian acquisitions overseas decelerated as deal value amounted to $2.4 billion, down 55.5 per cent from the comparable period last year ($5.4 billion). Consumer Products and Services (31.1 per cent) and Materials (27.9 per cent) registered a combined market share of 59 per cent from India’s outbound M&A activity.
Despite the 4 per cent decline in deal value from first half last year, the US accounted for 48 per cent of India's outbound activity this year given at least four out of ten of the top outbound deals this year targeted the US with a cumulative deal value of $1.1 billion. The Piramal Healthcare’s acquisition of Decision Resources Group, a Burlington-based provider of research, advisory and consulting services, from Providence Equity Partners, for an estimated value of $635 million was this year’s top outbound deal.