Inbound deals account for 75% of M&As' worth in Sept quarter

Inbound deals accounted for three-fourths of the total value of mergers and acquisition (M&A) deals during the quarter ended September 30, according to a study by Ernst & Young. Of the $13.5-billion worth deals executed during the quarter, inbound deals accounted for $10.1 billion, it said.

“This heightened inbound activity was primarily due to the improvements in the global M&A environment,” E&Y said. “Players in international markets are sitting on strong balance sheet positions and India’s relative resilience to the global economic downturn, coupled with the country’s expected growth potential, makes it a very attractive target destination.”

Fewer in number...
The inbound deals were larger in terms of value. Hence, they were fewer – about a fifth in terms of the number of deals, while most domestic deals were of the size $50 million or smaller.

Of a total of $13.5 billion during the quarter, two of the three biggest deals came from the oil & gas sector, the report released on Saturday said. It includes acquisition of Cairn’s India assets by Vedanta Resources for about $8.5 billion and merger of Reliance Natural Resources into Reliance Power worth at $1.5 billion, Ernst & Young said. Acquisition of the 14.99 per cent stake in JSW Steel for $1 billion by Japan’s JFE Steel formed the other big deal during the quarter, it said.

...and down in overall value
The quarter witnessed 225 M&A deals involving Indian companies valued at $13.5 billion, compared with $4.9 billion in the same period a year ago, which had a deal count of 251. Yet, the deal value was lower than the previous quarter ended June 30. The quarter of April to June witnessed 203 deals for $19.6 billion.

The mixed results can be attributed to the large number of small-sized deals (less than $50 million) in the latest quarter, which accounted for approximately 82 per cent of the total number of deals with disclosed value, Ernst & Young said in its report. “Although down in value, compared to either of the previous two quarters of 2010, the M&A scenario in the Indian context is still sizeable and the country is firmly positioned to maintain a high rate of activity in the near future,’’ the statement said, citing Ranjan Biswas, partner, Ernst & Young.