M&A activity declines 60% during Q1 2009

India’s merger and acquisition scene for the first quarter of 2009 has been dismissal. Indian companies were involved in a total of 54 deals for this quarter--that is a decline of 60 per cent year-on-year and about 40 per cent drop on a sequential basis--says a Venture Intelligence report.

In comparision, Indian companies closed 135 deals during the same quarter last year--both cross-border and domestic transactions-- and 89 deals in the immediate previous quarter.

First quarter of 2009 witnessed 26 deals with an announced value of $4.6 billion, the Venture Intelligence--a research service focused on Private Equity and M&A transaction--study revealed. There were 15 inbound and outbound deals each with the rest being domestic acquisitions. Manufacturing was the most active industry with ten deals followed by IT & ITES with seven deals. Healthcare & Life Sciences, Food & Beverages, Telecom and Agri-business were the other industries that witnessed significant M&A activity in Q1 ‘09.

The largest inbound deal saw France-based stationery manufacturer BIC acquiring a 40% stake in Mumbai-based stationery products maker Cello Pens for about $160 million (Rs. 800 crore). Other notable inbound deals included American Tower Corporation acquiring the XCEL Telecom, Mylan Labs acquiring residual stake in Matrix Laboratories and Sodexo’s acquisition of Radhakrishna Hospitality Services Group.

“The Radhakrishna Hospitality and Cello Pens deals seem to validate the thesis that 2009 is likely to witness significant inbound transactions by MNCs with strong balance sheets seeking to acquire Indian companies when valuations are attractive,” said Arun Natarajan, CEO of Venture Intelligence.

The first quarter also saw Indian companies aiming to close out on their acquisitions of global energy / commodities assets. Notable deals in this category included ONGC Videsh’s closing out on the acquisition of UK-based Imperial Energy for $1.9 billion and Sterlite Industries’ new bid for US-based copper mining firm Asarco at a renegotiated value of $1.7 billion.

The largest domestic M&A deal during the period was Reliance Industries’ acquisition of group company Reliance Petroleum. In other domestic deals, Private Equity-backed Nuzhiveedu Seeds acquired a 51% stake in two seed companies during the period - Yaaganti Seeds and Pravardhan Seeds.