India's share in global M&A less than 1%

The merger and acquisition (M&A) spree of corporate India seems to have hit a low, as India's share in the global M&A tally, which touched a whopping $3 trillion, is less than even one per cent.

Till September this year, corporate India has announced merger and acquisition deals worth $26.43 billion, which is around 0.8 per cent of the total global M&A kitty.

Commenting on the current market situation, KPMG Executive Director (Corporate Finance Group) Gaurav Khungar said: "The environment is plagued with conservatism and a wait-and-watch approach with absence of decision making or aggression... And questions on prospective bankruptcy risks are abound."

Khungar further said beyond the economic factors that have contributed to lack of credit for M&A or business operations, all economic advise in the media is providing guidance to companies to hold on to their cash positions.

Data compiled by deal tracking firm Dealogic shows there has been a slowdown in M&A activity across the world as all regions except Latin America reported decreasing deal volume. Accordingly, though the global M&A volume has reached a whopping $3 trillion mark so far this year, it represented a decline of 22 per cent from the year-ago period.

"Forex volatility in the recent months has contributed its own share of negative impact on profits. Equity analyst have re-rated earnings forecasts across sectors including infrastructure," Khungar said.

He further noted: "The aggregated affect of this is a slowdown in corporate India's M&A spree. Investors anticipate that over a period of time valuations will be more cash flow based and realistic."

The ripple effect of this downtrend was witnessed on the Indian shore, as the M&A tally decreased significantly by 46.42 per cent over the year ago period.

Another report from global consultancy major Grant Thornton showed the total number of M&A deals during the first nine months of 2008 stands at 381, with an announced value of $26.43 billion. In the corresponding period a year ago there were around 527 deals amounting to $49.33 billion.

Market experts said that the crisis in financial markets is acting as a dampener for M&A deals. Although, valuations of companies have gone down, banks are cutting down their exposure to funding deals.

"It is expected that gradual government actions across economies will selectively facilitate normalcy for credit requirements for ongoing business operations prior to long-term credit decisions becoming forthcoming," Khungar added.

The total number of M&A deals announced during the calendar year 2007 stood at 676 with a total announced value of $51.11 billion.