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M&A activity losing steam in India

The mergers and acquisitions (M&A) activity by India Inc seems to be running out of steam. According to a study, M&A deals have declined by nearly 60% in the first half of 2008 compared to the same period last year. Experts say if global financial conditions continue to remain under pressure, M&A activity will take a back seat.

  

According to a study by Grant Thorton, there were 335 M&A deals worth 43.97 billion dollars in first half of 2007. This year the value of M&A deals have declined to 17.4 billion dollars. Experts say it's lack of easy financing, that's creating a hindrance.

 

Harish HV, Partner, Grant Thornton said, “We had seen some mega deals last year, which were missing this year. We are buffeted by a global financial crisis this year. If it continues the way it is going now, we will see some more slowdown. Making deals at the end of the day requires the market to be vibrant and capital to be raised in an efficient way.

 

2007 witnessed some mega deals valued at as high as 12.2 billion dollars, compared to 2008,which did not see any deal valued over five billion dollars.

 

But experts predict, the second half of 2008 to see more outbound deals than inbound.

 

Data shows outbound deals worth over Rs 8,500 crore were struck in the first half of 2008. While inbound deals were limited over 4,700 crore rupees.

 

Harish HV said, “M&A’s are being made by small and mid sized companies compared to what we saw in the first half of last year. We get better valuations externally. The challenge is in making very large buy outs, which requires a lot of debt financing. That is difficult now.

 

2008 welcomed the maximum deals in Pharma, IT and banking and financial services sector. Experts believe a sustained global slowdown may take a toll on the pace.

Source: Money Control

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