Deal activity declines 35% to $9.7 bn in March 2023 quarter: Report

Deal activities declined 35 per cent to USD 9.7 billion across 332 transactions in the first quarter of 2023 due to an overall decline in deal activities as the fear of a global recession has gained more traction amid the continuing war on Ukraine, according to an industry report.

Of the total deals, M&As constituted more than half, still lower by 21 per cent at USD 4.4 billion involving 76 deals, down 56 per cent during the March quarter, according to the data collated by Grant Thornton. In volume terms, overall deals fell by 46 per cent to 332 transactions.

The main reason for the poor show was the tepid IPO market, which plunged to USD 84.4 million from USD 1 billion in Q1 of 2022.

On the other hand, QIP witnessed two fundraise -- Spicejet's cargo and logistics business raising USD 301 million, followed by Data Patterns raising USD 60 million. However, it was less than USD 541 million in Q1 of 2022.

Another reason is the deepening funding winter, resulting in PE activity recording its lowest in the last eight quarters, and the recent collapse of the Silicon Valley Bank in the US only added to the dry-run.

The decline in mergers and acquisitions activity, 21 per cent lower at USD 4.4 billion, was led by a 62 per cent fall in domestic activity, recording the third-lowest quarterly deal volumes for any given quarter since 2011.

The startup sector continued to lead the deal activity with 22 per cent of the deals for the quarter but was 71 per cent lower over Q1 2022, registering only 17 deals worth USD 69 million.

IT and pharma sectors remained active, accounting for 28 per cent of the overall M&A volumes for the quarter. Driven by Jaypee Infratech's insolvency case led by Suraksha Realty, the real estate sector accounted for 55 per cent of the quarter's value, amounting to USD 2.5 billion, marking the highest recorded transaction in this sector in the last 12 years.

Private equity activity also witnessed a decline to the tune of 42 per cent in volume and 44 per cent in value, recording 256 deals worth USD 5.3 billion. This was the lowest quarterly volume and value since Q4 of 2020.

The startup sector occupied the larger share of volumes with 60 per cent of deals. Driven by six high-value deals of USD 100 plus million, the e-commerce sector accounted for 30 per cent of the quarter's deal value, amounting to USD 1.3 billion.

The activity was led by Phonepe, which raised USD 350 million and USD 100 million each in the two funding rounds. The quarter also saw the largest ever series A by InsuranceDekho raising USD 150 million.