M&A sees highest quarterly deal value of $34.8 bn, 19% jump in Q2 CY18

Merger and Acquisition (M&A) activity in India saw a 19 per cent growth in terms of deals during the second quarter of 2018. The number of deals during the second quarter of 2018 calendar year stood at 273. In value terms, the deals stood at $34.8 billion, the highest quarterly deal value and 6.8 times higher than the $5.1 billion during the same quarter a year earlier. The jump in overall value was fuelled mainly by six big-ticket deals of more than $1 billion each. The biggest deal during the second quarter of 2018 -  Walmart's $16-billion acquisition of Flipkart - accounted for 46 per cent of the total disclosed deal value, according to EY India.

From a sectoral perspective, financial services with 39 deals worth $1.1 billion recorded the highest number of deals, while the consumer products and retail (30 deals; $16.5 billion) dominated in terms of deal value. Telecom (2 deals; $5.4 billion), diversified industrial products (23 deals; $2.9 billion) and metals and mining (6 deals; $960 million) were also in the limelight as they clocked substantially high deal value as well.

Amit Khandelwal, Managing Partner, Transaction Advisory Services, EY said, “M&A activity is expected to stay positive in the coming quarters, on the back of continued interest of financial and strategic investors in the Indian market. Domestic activity should strengthen further as players across sectors look to expand scale, de-leverage balance sheets and innovate their offerings through increased usage of new technologies. The restructuring deals will remain active in the coming months as the NPAs cleaning is a high priority for banks. Furthermore, the successful resolution of certain cases recently, with healthy recovery rates under the IBC, along with the implementation of project ‘Sashakt’, will further add to the pipeline.”

Cross-border M&A activity in the second quarter of 2018 calendar year touched a record high as the inbound deal value reached $23.2 billion across 69 deals on the back of the Walmart-Flipkart deal. Even after excluding this deal, the inbound activity remained good with 68 deals worth $7.2 billion, highlighting the difference from the last few quarters and reinforcing the confidence in India’s growth story. The outbound activity, with 34 deals worth $990 million, also showed a year-on-year improvement in both value and volume terms but was sub-par when compared to the long-term quarterly average.

Domestic M&A market continues to perform well

While the inbound activity led in terms of deal value, the domestic activity was ahead in volume terms and recorded a significant y-o-y jump both in the deal count and disclosed deal value. The domestic landscape witnessed 170 deals with a disclosed deal value of $10.6 billion compared with 152 deals with a value of $1.8 billion in the second quarter of 2017. Consolidation, anchored on portfolio reviews and increased focus on core businesses, and balance sheet de-leveraging remained the key deal drivers in the domestic arena.

The US continued to be the most active cross-border M&A partner for Indian companies during the quarter with a total of 26 deals (18 inbound and 8 outbound deals) for a total disclosed value of $16.6 billion. Japan, the United Kingdom and the Netherlands emerged as other key partners with investments across sectors.