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In the absence of big-ticket deals in January, the overall Merger & Acquisition (M&A) values fell 85 per cent in the month, recording $2.3 billion across 36 transactions. This is 23 per cent lower than deal volumes recorded in January 2018, according to a study by Grant Thornton.
Reasons for lull
The overall fall in the deal activity can also be attributed to the recent uncertainty around trade and Brexit, current fiscal conditions due to exchange rate volatility and rising crude oil prices that have resulted in the absence of big-ticket transactions as compared to January 2018.
“Inactivity in domestic M&A transactions mostly impacted the M&A report card for January. Consolidation for creating leadership position, the sale of non-performing business and expansion to new geographies were the underlying themes for key transactions last month,” said Pankaj Chopda, Director at Grant Thornton India LLP.
The focus in the current month was primarily on pharma, healthcare and biotech, manufacturing, IT and ITES, and banking and financial sectors for M&A transactions. Real estate, infrastructure, pharma, healthcare and biotech, and manufacturing are expected to be the sectors of interest based on the announcements in the Union Budget 2019.
Trend may continue
“Though the Union Budget has attempted to create a favourable deal environment, the deal activity is expected to be tepid for the part of the year considering the domestic political uncertainty and global economic conditions,” he added.
January 2018 recorded four transactions in the billion-dollar category, aggregating to $13.9 billion as compared with only one such deal in January 2019, which was valued at $1.3 billion. The report further states that such a drastic fall in the number of large transactions resulted in domestic transactions declining from $12.63 billion in January 2018, to $0.39 billion in January 2019.
Consequently, the average deal size in January 2019 reduced significantly to $64 million from $322 million in January 2018 and $234 million recorded in December 2018.
Pharma, healthcare and biotech sectors led the deal activity accounting for more than half of the total deal value driven by Radiant — Max Healthcare deal amounting to $1.3 billion. On the other hand, IT sector led the deal pack with eight deals valuing at $42 million, spread across IT solutions, mobile VAS, BPO, and hardware segments. Education, agriculture and manufacturing sectors have been active this month recording big-ticket transactions valued over $100 million.
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