With $54.7 b, M&As off peaks, still second best on record in 2017

Led by telecoms and energy, the deal street closed 2017 at $54.7 billion, which is marginally lower than the $59.7 billion notched up in the previous year, says a report.

According to a Mergermarket report, telecoms (the $12.4 billion Vodafone-Idea merger), technology and financial services were the top three sectors in terms of deal value and all three witnessed an increase compared to 2016.

But the report incidentally excludes the largest deal in the country’s history-the $12.9 billion sale of Essar Oil to Russia’s Rosneft in August. Had it been included, the total value would have been historic at $67.6 billion.

“Telecom played an important role since the first quarter of 2017. The value climbed 28.4 times to reach $20.4 billion from $718 million, with the deal count increasing from three in 2016 to 11 in 2017. The sector contributed 37.2 per cent of the total deal value, which was only 1.2 per cent in 2016,” the report said on Friday.

The second largest deal in the telecom space was Reliance Jio paying $3.7 billion to acquire the wireless spectrum, towers, fibre and media convergence node assets of the crippled Reliance Communication.

Energy, mining, utility decline

According to the report, energy, mining and utility spaces saw decline in both value and volume compared to 2016.

It plunged 69.4 per cent in value to $5.3 billion across 44 deals. This wouldn’t have been so had the report included the Essar Oil-Rosneft deal of $12.9 billion.

The largest deal in the sector was Adani Transmission’s $1.9 billion acquisition of the Mumbai distribution business from Reliance Infrastructure. Among 31 deals, 30 involved energy, and of which 23 fall under the renewable energy space and fetched a total value of $2 billion in 2017.

With government setting targets which would take the total renewable capacity to 175 GW by the end of 2022, more deals are likely to happen in the development of clean energy in 2018, the report said.

Total deal value in the financial services space rose 34.3 per cent to $6.9 billion from $5.1 billion in 2016, while deal count declined slightly to 40 compared from 45.

The largest deal in the sector was the $2.4 billion acquisition of Bharat Financial Inclusion by Induslnd Bank.

And with ongoing consolidation, more deals are likely among NBFCs, especially insurers, making 2018 stronger.

Outbound , inbound deals

However, outbound deal value continued to fall for the second consecutive year from $5.1 billion in 2015 to $4.6 billion in 2016 and $2.9 billion in 2017. Also, all the deals announced were below $1 billion and the largest was Motherson Sumi $731 million acquisition of Finland-based PKC Group.

On inbound deals, the report said after a record-breaking 2016 (195 deals worth $30.3 billion), activity (187 deals worth $23.5 billion) saw a slip in both value as well as volume in 2017.

The top three inbound deals amounted to $5.4 billion or 23 per cent of the whole year value — all three within the technology sector. More importantly, in terms of annual value, 94.4 per cent of M&As among technology targets was conducted by overseas investors.

American companies maintained their lead in terms of deal count, investing in 66 transactions worth $8.9 billion, which was an increase of 102.4 per cent in 2016 in eight deals.

Chinese came in second in value at $1.4 billion, up 56 times from $25 million in 2016.

COMMENT NOW