M&A activity in October falls by 45 per cent in deal terms: Study

Amidst uncertainties and slew of corrective measures by the Government, October recorded 28 merger and acquisition (M&A) deals worth $1.53 billion, compared to 47 deals worth $2.81 billion recorded during the same month of 2018, according to a Grant Thornton report.

These included one deal valued over $500 million and three deals valued at and over $100 million each, together totalling to $1.4 billion and accounting for 91 per cent of the total M&A deal values.

While the overall M&A deal values and volumes fell by 45 per cent and 40 per cent respectively, as compared to October 2018, the month witnessed a 1.8 times rise in deal values, showing signs of improved deal sentiments and appetite for big ticket deals.

This was driven by the government’s corporate tax cut, which has improved both investor sentiment and confidence. This also resulted in the average deal size more than doubling from $24 million in September 2019 to $55 million in October 2019.

‘Low activity domestically’

Pankaj Chopda, Director at Grant Thornton India said, “M&A activity in October 2019 witnessed 45 per cent and 40 per cent drop in deal values and volumes respectively, primarily due to low activity in the domestic deal trends. October 2018 had reported four large domestic transactions aggregating to about $2.1 billion, one in the energy and natural resources sector, two in the media and entertainment sector and one in the FMCG segment.”

“While the trend in energy and natural resources sector continued in October 2019, the domestic transaction was replaced by an inbound strategic investment in Adani Gas by French major Total SA to take India’s clean energy drive forward. Deal volumes was fairly spread across pharmaceuticals, automotive, banking and financial services, energy and natural resources, IT and ITeS, and media and entertainment sectors,” he added.

On the M&A front, while the domestic deal segment saw a downtrend in terms of both volumes by 25 per cent and values by 90 per cent, cross-border values on the other hand almost doubled with almost 3 times the fall in the deal volumes, indicating that month witnessed a trend of big ticket cross border deals. However, the overall M&A deal activity continued to see a declining trend as compared to previous comparable months.

Manufacturing, energy, start up, pharma, banking, IT, infra and e-commerce sectors led the deal values in Year-To-Date 2019, capturing 89 per cent of the total overall deal values. IT, start-up and pharma sectors continue to drive deal volumes capturing 47 per cent of the total deal volumes, it added.

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