Global caution sends private equity-backed M&A deal value to 6-year trough

A private equity fund gathers money from investors, particularly high networth individuals and invests in high-return opportunities

The value of private equity (PE)-backed mergers and acquisitions (M&As) in India reached a six-year low during the first seven months of the current calendar year, amid ongoing global uncertainties.

The total value of these deals stood at $6.2 billion during the period, down from $9 billion in the same period last year, and lower than the $14 billion recorded during the corresponding period in 2019, according to data from LSEG Deals Intelligence.

PE funds pool capital from investors, including high-net-worth individuals, to invest in high-return opportunities.

In July, the total deal value was $300 million, a sharp drop from $1.2 billion in the previous month. The data reflects deals where India is the target nation, regardless of the acquirer’s origin.

The decline in PE-backed deals in India can be attributed to PE funds holding onto $20 billion in dry powder, awaiting better opportunities, according to Mayank Jaswal, partner at Deloitte India.

July also saw a steep drop in the number of PE-backed deals, falling to a 45-month low of 21.

“The decline underscores a broader trend of caution in deal-making, as multiple headwinds have significantly dampened buyout and fundraising activity,” said Elaine Tan, senior manager at LSEG Deals Intelligence, in an email response.

Overall, the value of M&A deals for the first seven months of 2024 increased marginally by 4.5 per cent to $39.9 billion, up from $38.2 billion in the same period the previous year. However, this figure remains below the $48.5 billion recorded in 2019.

The total deal value in July was $4.8 billion, a decline from $7.1 billion the month before. The slowdown was also evident in deals under $1 billion during the first seven months of the year.

“Value of deals under $1 billion, which usually represent the bulk of deal volume outside of mega-deals, saw an 11 per cent year-on-year decline, marking the lowest first seven-month period since 2020. The number of deals in this segment fell 17 per cent compared to the previous year,” Tan explained.

In July, the total number of M&A deals dropped to a 38-month low of 116.

“With more than 40 countries holding elections this year, coupled with geopolitical uncertainties, global deal activity has been affected. Higher interest rates are also impacting the availability of funds and investor sentiment towards emerging markets,” said Jaswal.

Among sectors, telecommunications saw a considerable increase in deal value, rising from $0.4 billion in January-July 2019 to $4.3 billion in the same period of 2024, with the number of deals increasing from 10 to 13.

This surge was driven by Data Infrastructure Trust’s acquisition of ATC Telecom Infrastructure, the largest telecommunications deal involving India since Google’s investment in Jio Platforms in July 2020, according to Tan.

“The deal emphasises the growing demand for advanced telecommunications and digital services, as well as the need for telecommunications infrastructure in India to support digital growth and connectivity,” Tan added.

Of the 13 sectors analysed, six — including industrials, financial, and high technology — recorded a decline in deal value during the first seven months of 2024 compared to the same period in 2019. Although the number of deals in these sectors has increased, the overall deal value has dropped.

Despite growth in the technology sector, industrials accounted for the largest share of M&A deal values at 14.1 per cent in the first seven months of 2024. In contrast, financials led M&A activity in the corresponding period of 2019, with a 36.3 per cent share.

“With the possibility of interest rates easing globally, investment activity is likely to pick up in the remaining months of the year,” Jaswal added.