M&A and PE deal values halve in 2009

Weighed down by the slump in economic activity during the first half of the year, the value of private equity (PE) and mergers and acquisitions (M&As) deals dropped 48.96 per cent to $21.20 billion from $41.54 billion during 2008.

At the same time, the volume of deals came down by 36 per cent as investors continued to focus on existing portfolios with more precaution while selecting targets for investment, said the preliminary edition (December 13) of the annual dealtracker report by Grant Thornton. The total number of M&A transactions and PE investments stood at 488 in 2009 as against 766 in 2008.

"2009 has been a year of introspection for Indian deal makers. It has been a year that witnessed economic uncertainties. We saw M&A deal value decline, private equity investors were rather happy to see cash as part of their portfolio and IPOs became unheard of during the first few months of the year,” said CG Srividya, partner (specialist advisory services), Grant Thornton.

During 2009, domestic deals outpaced their cross-border counterparts in the M&A sphere. After a gap of three years, domestic M&As at 142 were higher than both inbound and outbound deals put together.

The report said there were several large group restructuring deals effected to strengthen operations, build on synergies and save on costs.

Moreover, fund raisers, who in the past had used large debt financing for acquisitions, turned to alternative sources for fund raising through American Depository Receipt/ Global Depository Receipt and qualified institutional placement (QIP) issues to support their renewed acquisition appetite. There were 49 QIPs valued at $8.26 billion, which accounted for 74 per cent of the total PE investments in 2009.