Deal activity in H1 2021 at $40.7 bn, down 14% over year-ago period

When compared with the second half of 2020, the $40.7 billion investments were a mere 2 per cent increase

The first half of the Calendar Year 2021 (H1CY2021) recorded deal activity worth around $40.7 billion over 710 transactions, which included both private equity and strategic acquisitions. However, the deal value was down 14 per cent when compared with the same period of 2020, as per the PwC India report titled, "Deals in India: Mid-year review and outlook for 2021 – Resilience and Recovery."

When compared with the second half of 2020, the investments were a mere 2 per cent increase.

PE activity in H1 2021 was at an all-time high at $26.3 billion, 19 per cent and 25 per cent higher compared to H2 2020 and H1 2020 respectively. The surge in deal activity was fuelled by billion-dollar buyouts and numerous large fundraising rounds by start-ups, boosting many of them into the unicorn club. PE investors are also shifting their focus towards sectors such as technology and healthcare which show stronger potential for growth.

Discussing the deal performance in 2021 thus far, Dinesh Arora, Partner & Leader - Deals, PwC India, said, "Key themes emerging in 2021 due to the uncertainty of current times area - growing divergence in asset valuations, the acceleration of deals in digital and technology, and increasing attention toward environmental, social and governance (ESG) matters. Policy and credit measures announced by the Government to revive the economy along with a stable banking system, have resulted in the growth of positive sentiments within the investor community."

In terms of outbound deals activity, the H1, 2021 was marked by the dominance of billion-dollar outbound deals, with the largest being Adani Green’s acquisition of SB Energy India for $3.5 billion, followed by Wipro’s acquisition of UK-based Capco at $1.45 billion. Excluding these billion-dollar deals, outbound activity amounted to $385 million across 26 deals.

The M&A deals space continues to be dominated by domestic deals with activity worth $6.2 billion being recorded in H1, 2021 and consolidation continues to be a standout trend.

The first half of 2021 saw an increased momentum in exits by PE, which was at a 5.4 times the exit value of H2 2020. Strategic sales accounted for 58 per cent of the exit value in H1, 2021 mainly due to two billion-dollar exits (Partners Group and the Canada Pension Plan Investment Board exited from GlobalLogic, and Abraaj Group and Alibaba exited from BigBasket). The PE exit boom can be attributed to the fulfilling of pent-up demand from the previous year, increasing M&A activity in the start-up ecosystem, focusing on consolidation in the technology sector with improved liquidity and the recent rebound and remarkable performance of the Indian stock market.

Stricter foreign direct investment (FDI) norms have provided an impetus to India-based start-ups and helped them to grow and leverage the market. The Covid-19 pandemic has accelerated the adoption of digital technology across sectors and Indian start-ups are establishing and strengthening their presence in the new normal. The technology sector dominated the PE investments space with 16 start-ups entering the unicorn club in 2021 compared to nine in 2020. EdTech is the emergent sector as major players like Byju's and UpGrad continue to raise funds.

Globally as well, the record levels of deal-making, both in terms of deal volumes and values, continued from late 2020 into the first six months of 2021. According to the PwC Global M&A Industry Trends: 2021 Mid-year Update, the volume of deals was roughly the same across Asia-Pacific, EMEA and the Americas, although deal value was more heavily weighted towards the Americas, a similar trend to 2020.