M&As drop by 36% in value terms against backdrop of global uncertainties

Ongoing global uncertainties have impacted business confidence and have dampened deal making. The month of August saw only 23 deals worth $ 0.85 billion, which was 36 per cent and 49 per cent lower in deal volumes and values, repectively, over August 2018. The month witnessed only one deal valued at over $500 million and one deal valued at over $100 million, totalling $0.6 billion and forming 84% of the total M&A deal values, according to Grant Thornton’s monthly M&A Dealtracker.

Compared to the previous month (July 2019), August, 2019, witnessed a steep downturn in M&A activity with an over 5x fall in deal value as against five high value deals worth $4.1 billion recorded in July 2019, and a 41 per cent decline in M&A volumes.

Year to Date (YTD) M&A activity continues to witness weak performance, both in terms of deal values and volumes as compared to YTD 2017 and YTD 2018. M&A in YTD 2019 recorded a 70 per cent fall in deal values on account of 13 marquee deals witnessed in YTD 2018 compared to only four such multibillion dollar deals witnessed this year, while volumes saw a 10% fall compared to YTD 2018.

The largest deal during the month was witnessed in the energy and natural resources sector, with the Adani-GMR deal valued at $ 512 million, followed by Air Water’s acquisition of Linde India in the manufacturing sector. Both the sectors witnessed one deal each together accounting for 83% of the total M&A deal value. In contrast to the previous month, August was dominated by deals in the IT and ITeS sectors with 8 deals worth $35 million, pushed by consolidation in the software development and IT solutions segment. 

The start-up sector remained active, after the IT sector, with 5 deals worth $ 25 million. The month also saw active deal making in the pharma and healthcare, e-commerce, banking, retail, and media and entertainment sectors.

On the positive side, the domestic M&A values recorded a 55% increase over August 2018 on the back of encouraging measures and easing reforms, said Pankaj Chopda, Director, Grant Thornton India LLP.

Domestic transactions primarily included acquisition of stressed assets to strengthen market leadership position, divestment consequent to global transactions, compliance with competition commission requirements in India and investments in technology products to improve market offerings and efficiency.

While core sectors like energy and manufacturing garnered top value M&A deals during the month for the very rationale of consolidating operating capacities, paring debt, deleveraging assets and establishing a strong presence, tech segments like start-ups, IT and e-commerce dominated the deal space with 15 deals pushing the M&A deal volumes during the month, said Chopda.