M&A activity in August drops to an 8-month low on fewer mega deals

Overall, however, deal activity in the eight months so far this year remains much higher than last year

Activity on India’s deal street seemed somewhat muted in August, with the total value of transactions dropping to an eight-month low $634 million (33 deals), thanks mainly to fewer big-tickets deals. Overall M&A numbers this calendar year (January-August), however, continue to be strong, with 317 deals in the first eight months aggregating a cumulative value of $74.8 billion, more than double the $32.3 billion in 281 deals during the same period last year.

The overall value of M&A deals in August was 33 per cent less when compared with the same month last year, and 93 per cent lower than the value in July 2018, show Grant Thornton data. Given the small ticket size of deals during the month, as many as 100 M&A and private equity deals together accounted for only $2 billion in value.

Among sectors, the pharma and health & biotech sectors attracted $235 million with two deals during August, while media & entertainment secured $135 million with 4 deals, start-ups $119 million across 12 deals, IT & ITeS sectors $59 million across 3 deals, and hospitality & leisure $19 million in 3 deals.

Health care had the biggest share of the M&A deal value, at 37 per cent. This was mainly on account of Constellation Alpha Capital Corp’s $212-million acquisition of Medall Healthcare. It was followed by media & entertainment, with a share of 22 per cent, and start-ups (19 per cent). 

This was unlike the previous month, when start-ups had accounted for 37 per cent of the deal volume. The deals in the start-up space were higher in number as established players acquired start-ups to digitise their operations, leverage operational efficiencies and expand consumer base. The media & entertainment sector had seen four deals, of which two were in the entertainment (multiplex and gaming) segment.

During the eight months to August, there have been 12 deals of more than $1 billion each in value, and 33 deals worth more than $100 million. These figures have been much higher than the two billion-dollar deals and 23 transactions of more than $100 million during the same period in 2017. The telecom, e-commerce, manufacturing, energy, agriculture, banking and information technology sectors, together capturing 94 per cent of total deal value, have all been big drivers this year. 

According to Pankaj Chopda, director of Grant Thornton India, the country continues to see strong growth in deal activity, backed by cross-border M&A and domestic consolidation, largely spurred by the bankruptcy process in India. M&A and PE deals taken together, the year has so far seen record $87.6 billion worth of deals — almost twice as much as that in the same period last year — supported by increased multi-billion-dollar transactions.

The robust 2.3-time year-on-year increase in M&A deal values in the January-August period, Chopda added, was primarily on account of revived domestic and cross-border deal activity. As for the remaining months of the year, he said, considering their proximity to lifestyle trends, the banking, financial services & insurance (BFSI), consumer & retail, manufacturing, IT & ITeS and pharma, healthcare & biotech sectors are expected to see high M&A deal activity. Further, lack of relief to power companies facing insolvency suits under the Insolvency and Bankruptcy Code, might also drive M&A transactions in the sector.