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PEs, strategic investors strike $5 bn deals on D-Street in January

January was an unusual month. Despite the market crash and battered valuations thereafter, deal makers had a hectic schedule. January recorded the maximum number of mergers & acquisitions (M&A) and private equity (PE) deals — the highest-ever in a single month in India. Strategic investors and PE funds were striking a deal every six hours, totalling 116 deals worth $5 billion.

The previous high was in January 2007 when there were 101 deals announced in a single month. In January 2008, according to the latest dealtracker from advisory firm Grant Thornton, there were 56 M&A deals worth $3.01 billion and 60 PE deals worth $2.05 billion. In volume terms, this was the biggest month for PE funds in India.

For PE deals too, the previous best was in January last year when 56 deals were announced. This had come down later during the year with an annual average of 33 PE deals per month during 2007.
Grant Thornton corporate advisory services partner CG Srividya says: “A lot of the deals announced in January would have actually been closed by December itself. Moreover, if we look at the stock market correction, it has not led to total collapse of all sectors, some have been affected less than others. Many PE funds were waiting for a correction to enter the market and the fall would lead at least some promoters to have realistic expectations. In fact, there could be a positive spin-off for PE deals because of the correction.”

PE firms, on the other hand, say it works both ways. While for PE funds it may appear to be a correction of valuations at last, some promoters may like to delay any impending deals having seen sky-high levels just one month back.

According to the country head of a large global private equity fund, who didn’t wish to be named, “I think it is too early to take a call on how the market crash would play out for future PE deals. It has been a few weeks since we saw the sharp correction.”

In value terms, deals during the month pale in comparison to the same period last year. This, however, was skewed by the multi-billion dollar Tata-Corus deal which was announced at the end of January ’07.

The most significant deals last month were Tata Chemicals’ acquisition of US-based General Chemical Industrial Products for $1 billion and Great Offshore's acquisition of SeaDragon Offshore for $1.4 billion.

Out of the total of 56 M&A deals, 18 were domestic deals with both acquirer and the target being an Indian firm having an announced value of $210 million. Of the remaining 38 cross-border deals, 27 were outbound deals with an announced value of $2.57 billion and 11 were inbound deals with an announced value of close to $230 million. This was in keeping with recent trends where a large number of Indian firms are acquiring overseas against MNCs picking equity in Indian companies.

On the PE side, the large deals last month included investments in Edelweiss Capital, Mahindra & Mahindra Financial Services, Ballarpur Paper Holdings, Jaiprakash Power Ventures, Akruti City, Peninsula Land and Vatika. All of these were $100-million plus deals.

Source: Economic Times

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