PE, M&A market set for upswing, say players

Mergers and acquisitions (M&As) and private equity (PE) investments in India dipped both in value and volume terms in 2009 due to the global slowdown. This, along with the sharp run-up in the equities in the second half of the year and too much liquidity globally, has made deal closure an arduous task for PE players. Despite this, the players are hopeful that the investment market will improve in 2010. The value of deals (both PE and M&As) announced in calendar year 2009 (January to December 13, 2009) was $21.20 billion as against $41.54 billion, a decline of nearly 49 per cent. During 2007, the value was $70.14 billion, according to data compiled by Grant Thornton.

The year has also seen significant consolidation with domestic dealmakers outdoing their cross-border counterparts in M&As. After a gap of three years, domestic M&As were more than both inbound and outbound deals put together. Several large group restructuring deals were done to strengthen operations, build on synergies and save costs. Fund-raisers, who in the past used large debt financing for acquisitions, turned to alternative sources such as ADRs/GDRs and qualified institutional placements (QIPs) to support their renewed acquisition appetite, said the Grant Thornton report.

Investments by venture capital firms were also impacted throughout the year. For the first nine months of 2009, the total investment was $201 million (across 46 deals), from $709 million across 124 deals in the same period for 2008, said a survey from Venture Intelligence. 

“The year 2009 has been a year of introspection for Indian deal-makers. It has been a year that has witnessed economic uncertainties. The global as well as domestic investment sentiment suffered a setback.

However, it seems to be slowly but surely witnessing a revival of sorts with increased deal activity, rise of QIPs, renewed interest in the real estate sector and several large deals in the discussion phase. We expect that 2010 will be a year of growth for M&As,” said CG Srividya, partner, Specialist Advisory Services.