Top 10 M&A deals account for over 64% of total value in 08: Grant Thornton

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Top 10 M&A deals account for over 64% of total value in 08: Grant Thornton

This article was posted on Dec 18, 2008 and is filed under Press Releases

The total number of M&A Deals announced during the calendar year 2008 stands at 445 with a total announced value of US$30.72bn as against 676.

The year 2008 has witnessed a global economic downturn due to the sub-prime credit crisis, fluctuating commodity and equity prices and the closure of a myriad of large investment banks and other financial institutions.

Despite recent events, M&A and Private Investment activity in India has seen some of the largest deals in sectors that were recently not very popular amongst Indian deal makers such as Microfinance, Oil & Gas and Automotive sectors. There have been some landmark deals announced during 2008 which displays India Inc’s resilience during turbulent times. The year also witnessed severalbn dollar deals, eclipsing 2007’s 7 deals by 2 additional deals. India Inc. remains a favourite destination for international Private Equity funding and Inbound M&A and also an active investor in International companies thereby increasing its global footprint.

M&A and Private Equity investment in India has seen consistent growth despite the recent turn of events in the global financial markets. The total value of deals (M&A and PE) announced in the calendar year 2008 was US$41.13bn as against US$70.14bn and US$28.16bn in 2007 and 2006 respectively. The average Indian M&A deal size was close to US$69.03mn, while the average Indian PE deal size was around US$34.04mn during 2008. It is important to note that the top 3 deals of 2007 accounted for around 57% (US$ 29.03bn) of the deals values during the year.

•Deal volumes (M&A and PE together) have dropped in 2008 as compared to 2007. There were more than 1000 deals in 2007, as compared to 751 in 2008.

•There were 24 M&A deals with deal value of over US$250mn in 2008 as compared to 22 deals and 20 deals in 2007 and 2006 respectively.

•The value of Cross Border deals (both Inbound and Outbound) announced in 2008 has reduced by almost 47% from 2007. The value of inbound deals has fluctuated from US$5.4bn in 2006 and US$15.50bn in 2007 to US$12.48bn this year. The value of outbound deals fluctuated from US$9.91bn in 2006 and US$32.76bn in 2007 to US$13.15

Out of the total cross border deals there were 193 outbound deals (Indian companies acquiring businesses outside India) with a value of US$13.15bn and 81 inbound deals (international companies or their subsidiaries acquiring Indian businesses) with an announced value of close to US$12.48bn. The average M&A deal value was US$69.03mn during 2008. The average value of cross-border deals was US$93.55mn which was significantly higher as compared to average value of domestic deals which was only US$29.74mn.

There were 171 domestic deals (both acquirer and target being Indian) with an announced value of US$ 5.09bn and 274 cross-border deals with an announced value of US$ 25.63bn.

•2008 saw a spurt in domestic M&A activity. The value of domestic deals announced has increased from US$4.99bn and US$2.85bn in 2006
and 2007 respectively to US$5.09bn in 2008, even though the volume of domestic deals decreased from 321 deals in 2007 to 171 deals in 2008.

•The value and volume of deals reduced by 40% and 34% respectively compared to 2007 which can be attributed to cascading effects of the global credit crisis in the second half of the year.

•PE deals during 2008 numbered 306 amounting to US$ 10.42bn as against 405 deals amounting to US$ 19.03bn in 2007.

Mergers & Acquisitions Round Up
The total number of M&A Deals announced during the calendar year 2008 stands at 445 with a total announced value of US$30.72bn as against 676 deals with a total announced value of US$51.11bn in 2007 and 480 deals amounting to US$ 20.30bn in 2006.

Private Equity Round Up
The total number of Private Equity Deals announced during 2008 stands at 306 deals with a total announced value of US$10.42bn compared to 405
deals with an announced value of US$19.03bn in the year 2007 and 302 deals with a announced value of US$7.86bn in 2006.

The volume of PE deals decreased by 24% during the year 2008 due to effects of the recent economic downturn. The average PE deal value fluctuated from US$26.02mn during 2006 and US$ 46.99 in 2007 to US$34.04mn during 2008.

With respect to high value deals, there were 28 deals and 57 deals of over US$100mn and US$50mn respectively in 2008 as compared to 53 deals and 83 deals of over US$100mn and US$50mn respectively in 2007.

Top M&A Deals
The top 10 deals accounted for more than 64% of the total M&A deal value in 2008. In 2007, the top 10 deals accounted for more than 73% of total deals values for the whole year. Most of the top 10 deals during 2008 were crossborder in nature (5 outbound deals and 4 inbound deals).

It can be observed from the table above that this year, top deals have occurred across various sectors. Last year 5 of the top 10 deals occurred in the metals and mining sector.

Daiichi Sankyo’s step acquisition of Ranbaxy for US$ 4.5bn was the largest deal in 2008.

Top PE Deals
The top 10 PE deals accounted for more than 29% of the total PE deal value in 2008. In 2007, the top 10 deals accounted for more than 39% of total deal values for the whole year.

As is the case with M&A, it can be observed from the table above that this year, top deals have occurred across various sectors. Last year, 7 of the top 8 PE deals occurred in the Real Estate & Infrastructure Management sector.

Providence Equity Partners investment in ABTL for US$ 640mn was the largest PE investment in India in 2008 followed by Symphony Capital’s
investment of US$ 450mn in DLF Assets.

M&A Sectors
Telecom and Pharma, Healthcare & Biotech sectors were the leaders as far as sectoral values were concerned. These sectors garnered US$5.8bn and US$5.5bn worth of deals respectively. Together, they accounted for as much as 37% of the total M&A deal value during 2008. The other sectors which have significantly contributed to M&A deal value in 2008 are Banking & Financial Services and IT & ITeS accounting for 11% and 10% of deal values respectively.

IT & ITeS leads the M&A volume proportion with 22% share of total number of M&A deals. Pharma, Healthcare & Biotech have the second highest share at 12%. Other significant contributors to deal volumes were the Media, Entertainment & Publishing and Banking & Financial Services sectors accounting for 8% and 6% of deal volumes respectively.

PE Sectors
The highest proportion of PE/VC investment (in terms of announced value) was made in the Real Estate & Infrastructure and Telecom sectors with an investment of US$3.3bn and US$1.4bn respectively, together accounting for over 45% of Private Equity investment made in India during 2008. Other sectors significantly contributing towards value of PE investment were Power & Energy and Banking & Financial Services Sectors accounting for 9% and 8% of deal values respectively.

IT & ITeS led charts in terms of volume with 55 deals in its sector accounting for 18% of deal volumes. This was followed by Real Estate & Infrastructure Management and Banking & Financial Services sectors with 50 and 32 deals respectively accounting for 16% and 10% of deal volumes respectively.

source: Indiainfoline

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