In­bound M&A deals on course to hit a four-year high this year

The Pak Banker - - COMPANIES/BOSS -

In­bound merger and ac­qui­si­tion (M&A) trans­ac­tions-stake pur­chases in lo­cal com­pa­nies or In­dian-owned for­eign as­sets by over­seas en­ti­ties-are on track to hit a four-year high in 2015 as for­eign strate­gic in­vestors seek to tap an ex­pected re­bound in Asia's third-largest econ­omy.

Be­tween Jan­uary and July, 70 in­bound M&A trans­ac­tions worth al­most $10.19 bil­lion were sewn up, com­pared with 165 deals val­ued at $11.22 bil­lion closed in all of 2014, ac­cord­ing to data from Grant Thorn­ton Llp's Deal­tracker re­port. In­bound trans­ac­tions made up half the over­all M&A deal value of $20.34 bil­lion in the Jan­uary-July pe­riod. Over­all, 322 deals worth $20.34 bil­lion have been closed this year.

This year's trans­ac­tion value does not in­clude large in­bound deals like Rus­sia's OAO Ros­neft's agree­ment to buy a 49% stake in Es­sar Oil Ltd be­cause fi­nan­cial de­tails of the pur­chase have not been dis­closed by the com­pa­nies. BNP Paribas SA's de­ci­sion to buy do­mes­tic bro­ker­age Sharekhan Ltd has also not been in­cluded in the tally for the same rea­son.

"There was a lot of pent-up de­mand in In­dia for in­vest­ments, which slowed down over the last two to three years be­cause of un­cer­tainty around gov­ern­ment poli­cies and ac­tions. We are see­ing a grad­ual im­prove­ment on that front, which is boost­ing the sen­ti­ment to­wards in­vest­ing in the coun­try," said Har­ish H.V., part­ner at Grant Thorn­ton In­dia.

Sev­eral large in­ter­na­tional com­pa­nies, which are sit­ting on a huge pile of cash, are look­ing at de­ploy­ing cap­i­tal, said Har­ish. To be sure, the value of in­bound M&A trans­ac­tions this year is dwarfed by the $29 bil­lion in deals struck in 2011, which was a 10-year high.

More rea­son­able val­u­a­tion ex­pec­ta­tions and the need for global in­vestors to di­ver­sify away from mar­kets like China, where growth is slow­ing, have also spurred this year's deal ac­tiv­ity apart from an ex­pected re­bound in eco­nomic growth that slowed in re­cent years.

The big­gest in­bound ac­qui­si­tion so far this year has been Cen­ter­bridge Part­ners Lp's pur­chase of Su­zlon Ltd's Ger­man sub­sidiary Sen­vion SE for $1.2 bil­lion. This was fol­lowed by Re­liance In­dus­tries Ltd's sale of 50% stake in Ea­gle Ford Shale in the US for al­most $1.07 bil­lion. Har­man In­ter­na­tional In­dus­tries' ac­qui­si­tion of soft­ware, mo­bil­ity and an­a­lyt­ics firm Sym­phony Teleca Corp. for $780 mil­lion was the third big­gest in­bound deal in the year to date.

My­lan Inc.'s ac­qui­si­tion of Famy Care Ltd's women health care busi­ness for $750 mil­lion and Alibaba Group's mi­nor­ity stake ac­qui­si­tion in One97 Com­mu­ni­ca­tions Ltd (which owns Paytm) for $575 mil­lion have been other sig­nif­i­cant deals.

Glob­ally, M&A trans­ac­tions are close to touch­ing the record high of $3 tril­lion seen in 2007. Ac­cord­ing to a 14 Au­gust re­port by Reuters, global M&A ac­tiv­ity has al­ready reached $2.9 tril­lion this year. Im­proved sen­ti­ment around the busi­ness en­vi­ron­ment in In­dia, a slow­down in com­pet­ing mar­kets like China and easy global liq­uid­ity are among the fac­tors that have spurred re­newed in­vestor in­ter­est in In­dia.

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