M&A deal activity witnesses sluggish start in Jan; value deflates by 85pc: Report

The overall merger and acquisition value deflated by 85 per cent to USD 2.3 billion across 36 transactions in January this year in absence of big-ticket deals, says a report.

"The overall fall in deal activity can also be attributed to the recent uncertainty around trade and Brexit, current fiscal conditions due to exchange rate volatility and rising crude oil prices that have resulted in the absence of big-ticket transactions as compared to January 2018," says Grant Thornton's monthly Dealtracker January 2019 report.

Total merger and acquisition (M&A) volume stood at 47 in January 2018, while the value was at USD 15,137 million, the findings of the report said.

"The overall M&A value deflated by 85 per cent, recording USD 2.3 billion across 36 transactions which is 23 per cent lower than deal volumes recorded in January 2018," it said.

January 2018 recorded four transactions in the billion-dollar category aggregating to USD 13.9 billion as compared to only one such deal in January 2019, which was valued at USD 1.3 billion, it said.

The report further said such a drastic fall in number of large transactions resulted in domestic transactions declining from USD 12.63 billion in January 2018 to USD 0.39 billion in January this year.

Consequently, the average deal size in January 2019 reduced significantly to USD 64 million from USD 322 million in January 2018 and USD 234 million recorded in December 2018.

"Inactivity in domestic M&A transactions mostly impacted the M&A report card for January 2019. Consolidation for creating leadership position, sale of non-performing business and expansion to new geographies were the underlying themes for key transactions last month," said Pankaj Chopda, Director, Grant Thornton India LLP.

As per the report, pharma, healthcare and biotech sectors led the deal activity accounting for more than half of the total deal value driven by Radiant Max Healthcare deal amounting to USD 1.3 billion.

On the other hand, IT sector led the deal pack with eight deals valuing at USD 42 million.

Education, agriculture and manufacturing sectors have been active recording big-ticket transactions valued over USD 100 million, it added.

Though the Union Budget has attempted to create a favourable deal environment - as mentioned in earlier reports of Grant Thornton - deal activity is expected to be tepid for rest of the year considering the domestic political uncertainty and global economic conditions, Chopda added.