Value of deals falls 66% in H1: Grant Thornton

The total value of deals, including mergers and acquisitions (M&As) and private equity (PE), in the first half of 2009 dropped 66 per cent to $7.81 billion from $23.02 billion in the first half of last year.

While Indian corporates witnessed fewer M&A transactions and PE investments, there were signs of recovery in the economy in the second quarter of the current year, said a study by Grant Thornton.

The total number of M&A deals announced in the first six months of 2009 stood at 123, with a total value of $4.93 billion.

Cross-border M&A deals have fallen from $12 billion in the first half (H1) of 2008 to just $1.4 billion in H1 of 2009, declining more than 85 per cent.

The value of domestic deals also dropped to $3.5 billion in 2009 as against $4.3 billion in the H1 2008. The number declined from 110 to 64.

“Indications of a recovery combined with an increase in availability of finance seemed to have increased the appetite of India Inc for M&As and PE investments.

“Companies are also involving themselves in value-enhancing restructuring exercises to better leverage their scale. There is also a surge in inbound transactions as global MNCs are once again looking for opportunities to operate and benefit from the Indian markets’ growth and cost efficiencies,” said Harish H V of Grant Thornton.

The top five M&A deals accounted for more than 69 per cent of the total value of deals in H1 2009 compared with more than 57 and 73 per cent in H1 of 2008 and 2007, respectively.

Most top five deals in 2009 were domestic, which is significant considering the large cross-border deals witnessed over the last two years.

“The slowdown was primarily witnessed in outbound deals, which declined from 108 in H1 2008 to 27. In terms of sectors, the first half of 2009 saw significant participation by sectors such as oil and gas, telecom, information technology and information technology enabled services,” said the report.
 

GOING INTO A FREE FALL Deal summary for the first half
	Value ($ mn)		Volume		Average ($ mn)
	2008	2009	2008	2009	2008	2009
Inbound	4,771.90	970.70	51.00	32.00	93.60	30.30
Outbound	7,064.60	446.90	108.00	27.00	65.40	16.60
Domestic	4,260.50	3509.60	110.00	64.00	38.70	54.80
PE	6,925.30	2887.20	185.00	93.00	37.40	31.00
Source: Grant Thornton

A half-year analysis of PE investments in India shows a mixed trend. PE deals have declined from $6.93 billion (185 deals in H1 2008) to $2.89 billion (93 deals in H1 2009).

The Q1 of 2009 witnessed 43 deals amounting to $904.44 million compared with 50 deals valued at $1.98 billion in the second quarter. The deal value more than doubled in the second quarter over the previous quarter.

The highest proportion of PE/VC (venture capital) investment was in real estate and infrastructure management, shipping and ports, and telecom —$1.61 billion, $161 million and $129 million respectively.

Och-Ziff Capital Management, Orient Global, Sandstone Capital, HSBC, Morgan Stanley and Prudential’s investment in Unitech for $352 million was the largest PE investment in India followed by HSBCs investment of $ 300 million in Indiabulls Real Estate through a qualified institutional placement.