The value of merger & acquisition (M&As) deals in the country during the second quarter of this year plunged 72% to $3 billion over the first quarter, impacted by adverse global and domestic factors, says an Ernst & Young report.
In the January-March quarter of 2012, deal valuations involving domestic companies stood $10.5 billion.
"Although the year started with a resurgence in the M&A activity, the number of deals have now declined significantly, as continued global economic uncertainty restrained expansion plans of companies," the report said.
The number of M&As involving domestic entities during the April-June period also dropped to 168 during the April-June quarter from 230 deals in the January-March quarter.
"The current domestic economic woes coupled with tight global liquidity conditions have weakened M&As in the latest quarter. The transaction activity is expected to remain at the same level in the third quarter too," E&Y India partner and national director for transaction advisory services Ranjan Biswas said in the report.
The report notes that the domestic deal count slumped 39% in reporting period compared to the previous quarter with 90 deals in Q2 against 147 deals in Q1 of 2012.
"The deal value declined significantly by 92% to $800.2 million in April to June against $9.4 billion in Q1. Domestic deals accounted for 54% of the total deal activity and 27% of the aggregate disclosed deal value," it said.
The report attributes the decline in domestic deals to tightened liquidity conditions along with depressed industrial and economic scenario.
"In-bound deals continued to dominate within the cross- border deals segment for the fourth consecutive quarter.
While in-bound deals declined marginally by 10% on quarter, deal value nearly doubled. Outbound acquisitions were at the same level as that of the previous quarter, indicating that the country is still cautious about expanding its wings overseas," it said.
Domestic companies entered eight acquisitions in the US collectively worth $812.1 million.
Piramal Healthcare's takeover of the US-based Decision Resources Group's professional services vertical for $635 million was the biggest outbound deal during the reporting quarter.