Even as economic weakness continues to hamper industrial growth in Europe and the US, investors from these countries will look to India for merger and acquisitions (M&A). The M&A activity in 2013-14 will see marginal growth in the chemicals industry, as against a declining trend for over past three years.
As per the senior officials of Deloitte Touche Tohmatsu Limited (DTTL) – global financial consultancy firm, more M&A activities will be seen in the chemicals segment this year on account investors’ preference for investments in India over other international markets.
“In the chemicals segment, agrochemicals and coatings industry will witness increased M&A activity this year as against a decline in past couple of years. Other sectors such as pharmaceuticals and engineering will also see good amount of acquisitions in 2013-14,” said Savan Godiawala, senior director, DTTL.
Companies and financial investors from developed world are increasingly looking at India for investments. “Factors such as technology, R&D, low cost of production and large market access will be the drivers for growth in the M&A space,” he said.
India’s chemicals sector has witnessed a slowdown in deal activity with its number of deals declining to 30 in 2011-12, as compared to 37 in 2010-11 and 53 in 2009-10. The aggregate disclosed deal value dropped to US $ 845 million in 2011-12 from US $ 1,314 million in 2010-11.
“We see this trend reversing from this year onwards and there will be marginal growth in number of deals in the chemicals sector,” said Godiawala.
DTTL’s latest report on 2013 Global Chemical Industry Mergers and Acquisitions Outlook, the global chemical industry is witnessing portfolio realignment as companies take steps to strengthen balance sheets, pursue consolidation strategies, and establish footholds in new markets.
According to DTTL, private equity investors remained active for putting their money in the mid-sized companies. “The rapid expansion by mid-size chemical companies on account of strong domestic and export demand led the PE investors registering keen interest in the sector,” the report noted.