Mergers and acquisitions (M&A) and private equity (PE) involving Indian companies together clocked $54 billion in 2011 from 1,026 deals. This was 15 per cent down from $62 billion in 971 deals in the previous year, according to a report by Grant Thornton.
The year emerged fairly resilient in terms of deal appetite, despite challenging circumstances, according to Mr H.V. Harish, Partner, India Leadership Team of Grant Thornton India.
There was a notable trend reversal in the year in cross-border M&As, with the focus shifting from outbound to inbound compared to 2010. Of the $10-billion worth deals seen in the year, seven were outbound. A growing local market against the backdrop of fears over economies in the European region and their impact globally could have made Indian targets a safer bet.
Outbound M&As remained intact as Indian acquirers continue to view outside markets as being strategic to their global growth plans. Companies like Mundra Port acquiring Abbot Point Port, GVK Power acquiring Hancock coal mines and Genpactacquiring Headstrong are some examples.
For the first time, an Indian company acquired a substantial stake in a Chinese State-owned firm for over $150 million. Oil and gas and telecom (inbound) dominated M&As recording values of $16 billion and $5 billion respectively.
Vedanta Plc's acquisition of Cairn India's assets for over $8 billion and BP Plc's acquisition of Reliance Industries' energy assets for over $7 billion signify that global players seems to be betting on oil and gas opportunities in India, Mr Harish said in the seventh edition of the annual deal tracker.
PE resurgence
The PE sector showed resurgence in the face of sluggish initial public offerings and qualified institutional placements markets coupled with return in confidence levels, which were seen lacking in 2009 and the first half of 2010. Investments returned in real estate and infrastructure businesses, with the sector garnering close to $2 billion of PE funding in 2011. While infrastructure investments in 2010 were mainly in commercial and residential businesses, in 2011 they were in large infrastructure projects, such as airports, roads and highways.
The year also saw e-commerce firms raising over $300 million from PE and venture capital firms, with a few companies receiving premium valuations.
Cautious deals
Grant Thornton expects cautious deal-making environment in 2012 as global economies try to cope with economic headwinds. Though macroeconomic issues will weigh heavily, it remains to be seen if the existing euro-zone uncertainties present an opportunity for Asian investors to capitalise on attractive valuation levels to boost outbound deals, the report said.