M&A deal value plunges by 46%, firms cautious after GST rollout

Corporate India’s merger and acquisition activity moderated by 46 per cent to $939 million in August compared to the same month last year as firms adopted a “wait and watch” approach amid GST rollout, says a report.

According to assurance, tax and advisory firm Grant Thornton, there were 48 M&A transactions worth $939 million in August, while in the corresponding period last year saw equal number of deals with value as high as $1.7 billion.

The 46 per cent decline in August M&A value was primarily due to the absence of big ticket transactions. Moreover, cross-border activity fell by 65 per cent compared to level recorded in August 2016.

“Though the number of M&A transactions remained stable, value of deals transacted declined by 45.81 per cent, primarily driven by reduced inbound transactions. It appears that the ‘wait and watch’ mode continued in August, primarily to check the progress on GST implementation,” Grant Thornton India LLP Partner Prashant Mehra said.

Deals in sectors

Sector-wise, infrastructure sector led the deal activity by contributing over 27 per cent of total deal value.

This was primarily driven by Dilip Buildcon Ltd’s stake sale in 24 road assets to Shrem Group for an enterprise value of $250 million, marking the largest transaction so far in this sector in 2017, the report said.

Moreover, increasing consolidation drove deal volumes in the start-up sector.

The month also witnessed some big ticket deals worth over $50 million in sectors such as agriculture, media and entertainment, retail and e-commerce.

“Consolidation in the core sectors such as IT and ITeS, media and entertainment, retail and consumer and start-ups continue to be the focus in M&A,” the report said.

On a year-to-date basis (January-August), there were 280 M&A transactions worth $32.19 billion, a 49 per cent increase over last year, when it stood at $21.64 billion.

Telecom, e-commerce, energy, pharma and manufacturing sectors brought in large deals in the January-August period contributing over 88 per cent of total M&A values, while volumes continued to be dominated by the start-up sector contributing 23 per cent of M&A volumes.

Going forward, Mehra said increasing application of Insolvency and Bankruptcy Code will bring more companies on the transaction table to reduce the debt burden and also to get a share of good assets at a reasonable price.