Pe-led buyout deals hit a record $5.5 billion in 2018

PRIVATE EQUITY BUYOUTS THIS YEAR ARE ALSO DOUBLE THAT OF 2017’S BUYOUT DEALS WORTH $2.7 BILLION

MUMBAI: Buyout transactions by private equity (PE) firms in India rose to $5.5 billion in 2018, the highest in five years, marking a shift in strategy for PE investors who had so far largely bought minority stakes.

Private equity buyouts this year are also double that of 2017’s buyout deals worth $2.7 billion, according to data from Venture Intelligence.

One of the large private equity buyouts that happened this year is Australian infrastructure group Macquarie’s purchase of 648km of national highways for $1.4 billion. This is followed by retailer Vishal Mega Mart’s acquisition by Kedaara Capital and Partners Group for $734 million, Greenko Energy Holdings that was acquired for $450 million by Singapore’s sovereign investment fund GIC and Abu Dhabi Investment Council. Out of 23 buyout deals in the first six months, seven worth $2.3 billion were in the infrastructure and real estate space.

The share of buyouts in the overall PE/VC investment pie in India is projected to grow progressively, driven by increase in funds available with PE investors and as more and more enabling conditions emerge, according to experts.

“Finding the right people to grow your business beyond a certain limit becomes difficult after a point. In that case, selling it off to a private equity investor who knows your business and has appetite makes sense,” said Dhanpal Jhaveri, managing partner, Everstone Group, which has $4 billion in assets under management.

Succession planning is another big enabler for private equity buyouts. Plus, selling one’s business does not carry a huge stigma now as it did earlier. “Unlike even 10 years back, today it is not taboo to sell your business if you do not have an heir,” Jhaveri said. “In such a case, selling it outside the family but to an expert who may know the business well, such as a PE investor, may make sense.”

The trend also indicated the willingness of private equity firms to get their hands dirty and run a business, said Sasha Mirchandani, founder and managing partner of Kae Capital, an early-stage venture fund. “I think this trend started when Blackstone acquired CMS in 2008,” he said, referring to the purchase of a 55% stake in Mumbai-based CMS Computers by the Blackstone Group.