Indian M&A hits all-time high in 2018 with deals worth $125 billion

Walmart's purchase of Flipkart sees M&A deal values double from $63 bn a year ago

Deals including the acquisition of online retailer Flipkart by American shopping giant Walmart made this the biggest year for mergers and acquisitions involving Indian companies on record.

The total value of transactions was $125.2 billion, according to data compiled by market-tracker Thomson Reuters Deals Intelligence. Data is as of December 14. This is nearly twice the $63.2 billion seen in the previous year.

The retail segment which included Flipkart was third with deals worth $18.3 billion. Other segments included materials and financials. Materials took the lion's share by sector, accounting for over a fifth of overall deal values. 

The targets in other major deals included Essar Steel India, Indus Towers, Hindustan Petroleum Corporation and Bhushan Steel. The deal size varied between $5 billion and $16 billion. 

“Number of announced deals grew 9.3 per cent from a year ago and witnessed the busiest annual period since records began in 1980. The average M&A deal size for transactions with disclosed values increased to $132.8 million in 2018 compared to $82.9 million over the same period year,” said the report.

Transactions in which foreign firms bought Indian ones were larger than Indian companies’ foreign acquisitions. Foreign companies’ acquired $53.8 billion worth of Indian companies. Indian companies’ foreign acquisitions were worth $13.3 billion. The United States was the biggest buyer. Its deals totaled $22.6 billion.  This represents a 272 per cent increase over the previous year. Other top countries include Luxembourg, United Kingdom and Canada.

The increase in M&A activity has also had its effect on those advising such companies.

This has also meant a step-up in the money that investment bankers have made. The advisory fees is $283.6 million, up 11.7 per cent over the previous year. Goldman Sachs topped the league tables, according to Thomson Reuters. Their fee income for the year came in at $74.2 million.

The next year may be more challenging. Analysts Sonal Varma and Aurodeep Nandi from financial services firm Nomura Group mentioned that India faces numerous growth challenges in the immediate future, as part of Nomura’s 10 December Asia Economic Outlook report.  

“…we believe the growth cycle peaked in Q2 2018 and will slow down to 6.6% y-o-y in 2019 from 7.4% in 2018. This is corroborated by the moderation in Q3 GDP growth to 7.1% y-o-y and is further supported by Nomura’s composite leading index for India, which has a one quarter lead on non-agricultural GDP growth and is already signalling an impending slowdown,” it said.