Deal activity plunges 87% YoY in May to $4.6 bn in value, 45% in volume

Deal activities fell a steep 87 per cent in May to USD 4.6 billion in value and by 45 per cent in volume terms to just 106 deals, according to an industry report.

May 2022 witnessed four multi-billion-dollar deals totalling USD 31.5 billion, while the reporting month saw big-ticket transactions, industry tracker Grant Thornton said on Monday.

The domestic market is also experiencing a downturn in deal activity following the turmoil in the global markets as a whole, especially in the global banking sector and the rising interest rates leading to high levels of volatility and uncertainty in the deal street, Shanthi Vijetha, a partner at Grant Thornton said.

M&As saw a steep 98 per cent fall in value and 45 per cent decline in volume compared to last May, recording only 22 deals valued at USD 675 million as there were practically no cross-broader deals, owing to global macroeconomic challenges, concerns of a potential recession and uncertainty surrounding valuations.

Domestic volumes hit a three-year low with 20 deals, while cross-border activity hit its lowest monthly volume and value to date. The biggest domestic deal was Godrej Consumer Product, snapping up Raymond Consumer Care for Rs 2,825 crore (announced in late April and concluded in the reporting month), the retail and consumer sector led the transaction values for the month with 51 per cent of the total M&As.

When it comes to private equity deals, despite a 44 per cent fall in volumes and a 45 per cent decline in value, the landscape saw 84 deals worth USD 3.9 billion as the startups continued to dominate deal activity, accounting for 55 per cent of volume.

Among startups, the enterprise application and infrastructure segment saw increased activity, followed by the fintech and retail segments, collectively contributing to 67 per cent of the volume. Of the total, B2B startups accounted for over 52 per cent of the funding at USD 96 million.

The real estate sector also saw a spike in deal value to USD 1.4 billion despite there were only four deals.

So far this year, deal value plunged 80 per cent to USD 19.3 billion owing to a global economic slowdown and investors hesitating to commit their capital in an uncertain environment, while volume fell 46 per cent. The year so far saw only three deals in the billion-dollar category and 34 deals above USD 100 million compared to six, and 60 such deals in the year-ago period.

The poor IPO market also scuppered the market, with the month seeing only one IPO raising USD 390 million, compared to eight issues raising USD 4 billion last May. QIP on the other hand, saw two issues valued at USD 42.7 million compared to none in May 2022.