January 2018 saw over a six-time year-on-year increase in the value of merger and acquisition (M&A) deals in India, says a new Grant Thornton report. Deals worth more than $15 billion were carried out in the first month of this year, whereas the value of deals undertaken in January 2017 was approximately $2.3 billion.
The Energy and Natural Resources sector had more than half the share in the total deal value, whereas start-ups consisted of 25% of the same; the revival of domestic investors’ interest in food tech, fin-tech, and on-demand services categories resulted in increased M&A deals in the start-up space. Despite the massive jump in the total value of the deals, the number of deals increased only marginally from 45 in January 2017 to 47 January 2018. However, when compared to December 2017, wherein 20 M&A deals were reported, the number has more than doubled. In terms of deal value, the amount has jumped to 44 times that of December 2017, during which not a single billion-dollar deal was carried out.
The report attributes to the increased M&A activity to the revival of domestic deal activity, which witnessed more than an eight-fold increase in its value. Four of the said domestic deals this year were valued at over $1 billion each, and together, they accounted for 98% of the total M&A deal values. The high-value deals between Oil & Natural Gas Corporation-Hindustan Petroleum Corporation ($5.8 billion), Reliance Jio-Reliance Communication ($3.8 billion), Adani Transmission-Reliance Infrastructure ($2.9 billion) and IDFC Bank-Capital First ($1.5 billion) have led to the unprecedented growth in the M&A activity last month.
Cross-border deals also recorded a rapid rise, and saw a two-fold increase, primarily due to three large transactions valued at over $100 million. These numbers have set the pace for fervent expectations in India Inc., where more consolidation is on the cards. The fact that domestic M&A deals in January 2018 were more than twice the total domestic deals (worth $5.6 billion) in the entire year of 2017 indicates that similar activity can be anticipated in the coming months as well.
After witnessing a dip in 2017, it seems like M&A activity in the economy is off to a good start this year. With the financial sector reeling under the pressure of Non-Performing Assets (NPAs), one can expect major restructuring of banks and financial institutions in the coming months as well. Furthermore, the positive numbers of the macroeconomy have boosted private investor confidence, as a result of which, the start-up domain is also likely to witness increased funding, tie-ups, mergers and acquisitions.
Pankaj Chopda, Director, Grant Thornton India LLP, said, “Deleveraging the asset holding companies and strengthening the market position appeared to be the motive for the large domestic/merger transactions... debt leveraging, insolvency proceedings and pressure to strengthen/retain market position will continue to drive M&A transactions in energy and natural resources, industrials and banking and financial services sectors.” Grant Thornton, an assurance, tax, and advisory firm, also releases the ‘Dealtracker’ report, which provides a comprehensive account of the M&A activity in the economy.