The global uncertainty is impacting the valuation of merger and acquisitions for India Inc for the third quarter (July-September) of calendar year 2011.
The total M&A, private equity and QIP deals were valued at $8.10 billion across 246 deals for Q3 of 2011, as compared to $17.40 billion across 200 deals in the corresponding quarter of 2010, said the Grant Thornton Q3 data. The deal value is down by almost 50 per cent on a year-on-year basis.
The fall in value is evident in the inbound (foreign companies or their subsidiaries acquiring Indian businesses) deal activity as well. In the third quarter, 34 inbound deals were signed for a value of $1.19 billion. For the same value of $1.19 billion in 2010 across 19 deal in Q3 of 2010, according to the London-based global organisation of accounting and consulting member firms that provide assurance, tax and specialist advisory services to privately held businesses, public interest entities and public sector entities.
“The economic uncertainty has impacted the fundamentals and sentiments. Moreover, there are no big-ticket deals happening,” said Srividya C G, partner and practice leader (valuations) at Grant Thornton India. “Even in the case of outbound activity, it is only in this quarter that we see some activity. Last year was good for M&A as the economy was doing well: people were buying as they saw growth. More importantly, the industry was coming out of the slowdown on 2009. The good news is that deal activity has gone up.”
The impact of the global uncertainty and market volatility was evident on the public market (IPO) activity as well. The first nine months of the calendar year 2011 saw only $1 billion worth of funds being raised through IPO, compared to $8 billion in the whole of 2010. The IPO market hit its highest in the fourth quarter of 2010 and saw a fund-raising of $4.9 billion.
The volume activity, though, was better in the private equity space; the value was impacted. In the Q3 of 2011, PE deals amounted to $1.91 billion across 94 deals. In the same quarter of 2010, across 58 deals PE players invested $1.71 billion. Though the domestic deals has gone up in volume, but Srividya pointed out that this was primarily due to group restructuring, and mergers coming to completion.