Indian companies were involved in $7.7 bn-worth M&A deals

Chennai, Nov 3 (IANS) Mergers and acquisitions (M&A) involving Indian companies saw 18 percent growth in value terms at $7.7 billion while the number of deals remained at 233 during the third quarter of 2015, said EY Services Ltd on Tuesday.

In statement citing the Transactions Quarterly 2015, the company said the M&A activity involving Indian companies picked up momentum during the quarter ending September 2015 and saw a total of 233 deals — both inbound and outbound.

The M&A activity is expected to remain strong in the coming months, on the back of positive economic outlook, improved investor confidence and favourable capital markets.

The cumulative disclosed deal value registered during the third quarter of 2015 was $7.7 billion.

“While this represents an 18 percent increase in terms of aggregate disclosed value as compared to $6.5 billion in 3Q14, the deal volume remained at the same levels (232 deals in 3Q14),” the statement said.

According to EY Services, the technology sector continued to dominate the M&A sector tables in terms of volume, accounting for 36 deals, as companies remained focussed on acquiring firms specializing in SMAC (social media, mobile, analytics and cloud) capabilities.

“Cross-border transactions were a significant driver of the M&A activity. This reflects increased business confidence of global playersin the Indian economy and the domestic companies. The M&A activity on the domestic front, though subdued, is expected to pick up over the next few months as the economy continues to improve.” Amit Khandelwal, partner and national director, transaction advisory services, EY was quoted as saying in the statement.

Cross-border M&A dominated the country’s deal landscape during the quarter with 116 deals with a cumulative disclosed value of $6.6 billion, accounting for 85 percent of the total disclosed deal value.

Compared with the previous quarter, the deal volume increased by 27 percent (91 deals in 3Q14) and deal value by 150 percent ($2.6 billion in 3Q14), EY Services said.

This surge in deal value can be attributed to three outbound big-ticket transactions ($500 million and above) and two inbound deals totalling to $3.6 billion, compared to only one big-ticket cross-border transaction in 3Q14 that being an inbound deal valued at $610 million.

According to EY Services, the quarter under review witnessed 33 outbound deals with a cumulative disclosed deal value of $3.6 billion.

The deal volume remained nearly flat for the third quarter as compared to corresponding period last year.

However, the value size of the deals for the quarter under review went up by eight percent from $401 million for corresponding period in 2014.

Key transactions within the space included ONGC Videsh Limited’s agreement to acquire up to 15 percent stake in Russia-based CSJC Vankorneft for $1.3 billion, Lupin Limited’s agreement to buy the US-based Gavis Pharmaceuticals LLC and its affiliate Novel Laboratories Inc. for $880 million and Cipla Limited’s agreement to acquire the US-based InvaGen Pharmaceuticals Inc. and Exelan Pharmaceuticals Inc. for a joint consideration of $550 million.

“Of the top 10 deals of the quarter in terms of value, 50 percent were outbound and drove the significant increase in value to $3.6 billion in 3Q15, compared to $0.3 billion in 1Q15 and $0.5 billion in 2Q15.

“These transactions marked an end to a prolonged absence of big-ticket outbound transactions from the M&A activity in India since 2012,” said Khandelwal.

On the inbound front, a total of 83 deals were registered with a cumulative disclosed deal value of $2.9 billion, up from 60 deals with a total disclosed deal value of $2.2 billion in 3Q14.

Technology, infrastructure and financial services were the most active sectors for inbound investments.

According to EY Services, the US companies continued to be the most active counterparts of Indian companies in the cross-border transactions.

During the quarter, players from the US were involved as acquirers in 23 inbound deals and as targets in nine outbound transactions.

Companies from the UK followed next with 6 inbound and 5 outbound transactions.

Domestic M&A activity took a plunge this quarter, both in terms of disclosed deal value and volume. The deal volume decreased to 117 from 141 in 3Q14 and aggregate disclosed deal value decreased to $1.1 billion from $3.9 billion in 3Q14.

The largest deal in domestic arena was Birla Corporation’s agreement with Lafarge India to acquire its two cement assets for $768 million.

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