Dealmaking is back in the private equity and venture capital circles with the economic recovery taking hold.
The gestation period for deals which doubled to 6-9 months, rising even up to a year in fiscal 2009, has also come down and deals in various stages of due diligence are finally seeing closures.
Bharat Banka, MD & CEO, Aditya Birla Capital Advisors, said, “With the exception of any unanticipated shocks in the economy such as extremely weak monsoon or external shocks such as oil prices, the investment interest is expected to remain robust.”
While the volume of PE deals, including angel funding and VC transactions, in April declined by a quarter over the peak in April 2008 to 34 transactions, it grew 6% over March 2010 and 55% over April 2009, the VCCEdge report said.
Last month saw $762.15 million deals in the PE/VC space led by $728.55 million worth of pure PE transactions and the remaining coming from the VC stable.
Deal value was up 168% over April 2009, highest in that month in the last four years.
Darius Pandole, partner, New Silk Route Advisors Pvt Ltd said the momentum will continue and 2010 will witness good activity both in terms of value and number of transactions. “Overall investments this year should reach close to $10 billion, if not more. While we may not exceed, we should definitely inch closer to the 2008 levels,” Pandole said.
Pure PE deals almost trebled in April 2010 over the same month last year, according to the VCCEdge report.
Amitvikram Sharma, partner, Milestone Religare Investment Advisors Pvt Ltd, feels this is particularly because of the rising and stabilising stock market.
“In the past seven months we have deployed approximately 40% of our Rs 450 crore education and healthcare focused fund in four businesses,” he said.
However, in terms of quantum of money, VC deals in April 2010 were less than half of what they were in April 2008 even as they rose 30% over April 2009.
Harshal Shah, CEO, Reliance Venture Asset Management, said VCs today are increasingly doing a realistic assessment on critical parameters such as path to profitability and cash, return on investments, etc, while funding companies.
“The shake-up in the VC industry led to the emergence of serious players who have the wherewithal to strengthen their position as they continue to create maximum investor and shareholder value for their investee companies. This will lead to the market seeing a lot of good and valuable deals coming at the right valuations,” Shah said.
Since January the investment fraternity also see momentum in the large-ticket deals that have been surfacing at regular intervals. However, a few dealmakers also see strong recovery in public markets affecting PE/VC deals.“Quite a few deals are getting renegotiated because the promoters feel they are divesting at a significantly discounted price,” said a senior PE firm official.
Source: DNA India