Merrill Lynch tops Indian M&A league

Jumps to first from 7th last year in a smaller market; says its focus is larger deals and clients

Merrill Lynch, the global investment bank, has come on top of the mergers and acquisition (M&A) league table in India for the first time since it was acquired by Bank of America about five years earlier.

With six deals here, valued at a total of $8.6 billion, the M&A advisor has surpassed its global rivals, Citi and Morgan Stanley, in a year where the total deal value dropped to $68.9 bn from $165 bn a year before.

With India’s gross domestic product growth coming down to 4.5 per cent and  US GDP growth improving to 3.6 per cent, the investment in India has suffered. Revival in the US economy has diluted the interest of US-based companies in Indian assets.

“Valuations people will pay for assets in India have come down,” says Raj Balakrishnan, managing director and head of investment banking at Bank of America Merrill Lynch (BofAML). “While that does not apply in every sector, as growth rates vary, sector to sector and asset to asset, people are taking only rational calls,” he says. This has brought down the number of total deals so far this year to 58, from 75 in 2012.

Despite this, BofAML, with its focus on large deals, bagged transactions such as UAE-based Etihad Airways buying a 24 per cent stake in Mumbai- based Jet Airways for $378 million. However, it was not a part of the largest inbound deal of the year, where Anglo-Dutch firm Unilever raised its stake in Hindustan Unilever to 67.28 per cent from the earlier 52.48 per cent, in a transaction valued at $3.5 bn.

“From a coverage perspective, we are no longer all things for all people and are, instead, focused on the most important deals and clients. We have certain global fee thresholds and we will not normally do deals if we do not meet these,” says Balakrishnan, talking about the generic approach of his firm to a variety of deals.

Other deals the firm participated in during the year are Videocon Industries’ sale of its oil asset in Mozambique and its acquisition by ONGC Videsh. Besides, Apollo Tyres’ bid for US-based Cooper Tire & Rubber and US-based Pfizer’s local unit buying rival Wyeth’s business in India. The bank also advised Oil and Natural Gas Corporation for the $529-mn acquisition of Petroleo Brasileiro’s oil asset in Brazil.

The firm was seventh in the league table last year and claims this wasn’t a real reflection of its position, as in the Vedanta group’s three-way merger of Sesa and Sterlite, it got credit only for the latter. Barring this technical reason, the firm would have come third in the table, it claims.

“The league table is, ultimately, recognition of the value your advice gets from your client. So, as long as clients are valuing your advice, you are okay. It is not that we do deals for the sake of getting in the league table,” says Balakrishnan.