M&A deal may touch $32 bn this year: Experts

Merger and acquisition activity in India is expected to see a significant jump and may touch $32 billion by the end of this year as overseas corporates, which had adopted a wait—and—watch attitude towards the country prior to elections are now more likely to seek deals.

Experts believe that foreign interest in India never really fell as multinational clients, had consistently mentioned India as their top or close to the top priority.

However, over the last few years, a level of uncertainty had crept in owing to policy paralysis perception coupled with the global economic issues which resulted in companies hitting ’pause’ button with regard to investments.

“In light of the success of the Modi wave that captured both the Prime Ministership and Parliament, we expect there will be significant uptick in both inbound and outbound investments,” Ashok Lalwani Head of Baker & McKenzie’s Global India Practice said.

However, this has to be underpinned by the government eliminating some of the uncertainty that currently is in the system, Lalwani added.

The pace is expected to be greater for inbound deals, which have been largely pushed back for many months now for want of better clarity on the policy stance of new government.

Inbound deals are expected in sectors like industrials, infrastructure and chemicals. Buyers from the US, Europe, Japan, Middle East and potentially China would be lured by India’s demand for infrastructure and growth potential.

“We expect the momentum to build up strongly over the next few months; actual inflows may take longer, but we would expect to see visible impact by Q4 of 2014 if not earlier,” Sanjeev Krishan, leader Private Equity, PwC India said.

He stated that $30-32 billion of M&A activity appears possible this year.

According to global deal tracking firm Mergermarket, India targeted M&A activity was valued at $17.1 billion in H1 2014, a 47.4 per cent increase from H1 2013 when it stood at $11.6 billion.

The April—June quarter of this year saw deals worth $13.4 billion, accounting for 78 per cent of the total first—half deal value. In the January—March quarter, there were M&A transactions worth $3.7 billion.

Vikram Hosangady, Head—Transactions & Restructuring practice KPMG in India, believes that the renewed interest in India is a combination of two things.

Firstly, the global investment community believes that the new government with a decisive mandate and a pro policy and investment bent of mind will result in India coming back strongly on the growth track.

Secondly, global economy also seems to have bottomed out and more corporates are confident of expansion and investment in different geographies, Hosangady said.

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