Indian M&A reports 18% increase in aggregate disclosed value: EY report

Total of 233 deals with a cumulative disclosed deal value of $7.7 billion were signed

Merger and acquisition (M&A) activities involving Indian companies picked up momentum with 233 deals worth $7.7 billion as of end-September 2015 quarter, according to EY Transactions Quarterly Report. This represents an 18 per cent increase in terms of aggregate disclosed value compared to $6.5 billion from 232 deals a year ago.

The technology sector continued to dominate M&A tables in terms of volume, accounting for 36 deals, with firms focused on acquiring social media, mobile, analytics and cloud, or SMAC companies.

Amit Khandelwal, partner and national director, transaction advisory services at EY, commented that cross-border transactions were a significant driver of the M&A activity. “This reflects increased business confidence of global players in the Indian economy and domestic companies. M&A activity on the domestic front, though subdued, could pick up over the next few months as the economy continues to improve.”

Cross-border deals dominated the country’s M&A landscape during the quarter with 116 deals with a cumulative disclosed value of $6.6 billion, accounting for 85 per cent of the total disclosed deal value. Compared with the previous quarter, the deal volume rose 27 per cent from 91 deals and deal value by 150 per cent from $2.6 billion last year. This surge in deal value can be attributed to three big-ticket outbound transactions of $500 million and above and two inbound deals totalling $3.6 billion, compared with only one big-ticket cross-border transaction in the September 2014 quarter — of an inbound deal valued at $610 million.  Outbound M&A witnessed 33 deals with a deal value of $3.6 billion.

While the deal volume remained at similar levels as seen in the corresponding period last year (31 deals), the disclosed deal value saw an increase of eight times from $401 million last year.

Key transactions included ONGC Videsh’s acquisition of 15 per cent stake in Russia-based CSJC Vankorneft for $1.3 billion; Lupin’s buying out US-based Gavis Pharmaceuticals and its affiliate Novel Laboratories Inc for $880 million; and Cipla’s acquisition of US-based InvaGen Pharmaceuticals Inc and Exelan Pharmaceuticals for $550 million.

“Of the top 10 deals of the quarter in terms of value, 50 per cent were outbound... These transactions marked an end to a prolonged absence of big-ticket outbound transactions from M&A activity in India since 2012,” said Khandelwal.

On the inbound front, the quarter recorded the highest number of transactions in five years, reflecting the resumed foreign investors’ confidence in India’s long-term growth story. There were 83 deals with a cumulative disclosed deal value of $2.9 billion as of September 2015, up from 60 deals worth $2.2 billion in the year-ago period. Technology, infrastructure and financial services were the most active sectors for inbound investments.

The US continued to be the most active cross-border partner. US firms continued to be the most active counterparts of Indian companies in cross-border transactions. During the quarter under review, players from the US were involved as acquirers in 23 inbound deals and as targets in nine outbound transactions. Companies from the UK followed next with six inbound and five outbound transactions.

Domestic M&A activity took a plunge this quarter, both in terms of disclosed deal value and volume. The deal volume fell from 141 in September 2014 to 117 and aggregate disclosed deal value dropped from $3.9 billion to $1.1 billion. The largest deal in domestic arena was Birla Corporation’s agreement with Lafarge India to acquire its two cement assets for $768 million.

On the outlook, EY said the latest quarter ended on a positive note for Indian M&A activity, registering significant improvement in disclosed deal value and sustaining healthy levels of deal volume. The M&A activity is expected to remain strong in the coming months, on the back of positive economic outlook, improved investor confidence and favourable capital markets.