India Inc’s deal activity in the first six months of this year stood at $28.3 billion, a 20 per cent decline over last year, the global consultancy firm Grant Thornton said.

It said that economic woes in the domestic as well as international sphere and recent tax regulations impacted the deals.

According to Grant Thornton’s half yearly Dealtracker, deal value in the first half of this year dropped to $28.3 billion from $35.4 billion in the comparable period a year ago.

The deal momentum continued in 2012 with 544 transactions as compared to 508 in the year ago period but the value of deals suffered owing to “economic headwinds in Europe, overall tightening of liquidity in the market and the recent tax regulations,” Grant Thornton said.

Going ahead, India Inc’s deal activity is expected to remain robust as the remaining half of 2012 is likely to see activities across sectors like IT/ITeS; pharma and healthcare; auto components; media; telecom and financial service, H V Harish of Grant Thornton India Leadership Team said.

A significant proportion of the deal value can be attributed to domestic internal mergers and restructuring transactions like Sesa Sterlite and TechMahindra-Satyam mergers as there was a dearth of large transactions.

“Government’s intervention on policy issues, especially tax regulations and FDI in sectors like retail, aviation will play a role in driving large transactions, especially inbound deals,” Grant Thornton India Partner (Transaction Advisory Services) Raja Lahiri said.

A sector-wise analysis shows that healthcare and internet space appears to be the most bullish spaces as these sectors attracted good investor interest.

“Following the financial crisis of 2008, the flow of economic power from ‘west’ to ‘east’ has undoubtedly sped up,” Grant Thornton India Senior Partner, Mergers and Acquisitions, Munish Khanna said.

Out of the $28.3 billion worth of deals, the pure play merger and acquisitions (M&As) amounted to $24.6 billion, while private equity transactions amounted to $3.8 billion.

The first half of 2012 saw M&A deal value suffering a loss of 19 per cent compared to last year, while PE deal value was down by about 45 per cent compared to the first half of 2011.

Some of the key M&A deals in H1 2012 included the acquisition of RBS’ retail and commercial banking business in India by HSBC, followed by Piramal Group’s acquisition of Decision Resources Group, US and Mitsui Sumitomo Insurance’s investment into Max New York Life Insurance.

The key PE deals in the first half of 2012 included Morgan Stanley’s investment in Continuum Energy, Accel and Tiger Global’s investments in Flipkart and Tamasek’s investment into Godrej Consumer, the report said.

(This article was published on August 7, 2012)
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