What happens to the deal makers themselves when deal activity comes down to a grinding halt? The year 2009 was a difficult year for Indian M&A deals. Firms like Bloomberg, Dealogic and Grant Thornton that track M&A deal making statistics estimate that M&A deal volumes came down more than 50 per cent to about $21 billion from close to 500 deals in 2009.
Compared to 2008 when India Inc did deals worth close to $45 billion from about 800 deals. The fall in deal activity is even more startling when it comes to international deals involving Indian companies. Grant Thornton estimates inbound deal volumes (of global companies buying Indian companies) in 2009 were just above $3 billion from a high of $12 billion last year. What about Indian companies buying abroad? The whole theme of India Inc going abroad? “Next question please,” wryly said an investment banker whom Business Standard spoke for this story.
How does such a drastic change in the deal making scenario affects the deal makers themselves? The recently researched Bloomberg league table of Indian M&A for Jan-Dec 2009 is an eye opener. Bloomberg league table is considered by most as the holy grail of investment bankers that all bankers look forward to eagerly in January. The bankers’ gold standard for who did more deals in the previous year. The publication of which is normally immediately followed by advertisements and client mails from the I-bankers talking about how great they are — in the Top Five for the last Five Years and so on.
The accompanying table of the Top Ten investment bankers in India mirrors the trend in the Indian deal making space in 2009. What happens to international bankers when international deal making falls of the cliff? They just fall all the way. Notable absentees from the Top Ten list include the big deal makers — Goldman Sachs, Credit Suisse, JP Morgan, Lazard, HSBC. Some of them don’t even make it to Top 30 or Top 40.
And who replaces them? Indian home-grown bankers with relations and skills who understand and work closely with their clients rather the bankers with the cheque books. The Top Five are desi firms this year. E&Y, ICICI, Kotak, MAPE Advisory and Enam. (E&Y is largely considered a local firm, given the fact that the ownership and control is fully with one Indian family — however it is part of a global network.)
And the only big names who made it to the Top Ten are BankAmôDSP Merrill Lynch and Citibank — both firms with long and deep experience and relations in India. Closely followed by Morgan Stanley and UBS and rank number 11 and 12 respectively.
A head of a multinational investment banking team said: “India is only following a global trend. My AsiaPac colleagues are scrambling aro-und to see if they can buy a little known firm because they are in the Top 20 list and in the first time in our regional history we failed to make it to even Top 20. It is back to basics — relationships and skills. Otherwise how could a boutique bank be there in Top 5 ? Another two in the next five? Perhaps we also should look at buying boutiques in India like my counterparts in Asia!”