Mergers down 25%: Report

KPMG's corporate finance study says 258 M&A deals were struck in 2004.

Even as the value of global mergers and acquisitions (M&A) completed have grown by 47 per cent since 2000-end the value of M&A activity in India has been stagnant in the same period, according to KPMG Corporate Finance.

The M&A activity in the Indian market is lower than the previous year with 258 deals being completed in 2004, a 25 per cent drop when compared to the previous year.

However, deal values were the same at $5,595 million indicating that average deal sizes have increased. There has also been a shift from organic growth stories to consolidations and buy-outs.

Overall Asia was seen to be outperforming, while Europe is lagging behind.

The US, on the other hand, has recorded higher values. Carlton Pereira, managing director, KPMG India said "Many of Europe's economies have continued to under-perform and initial hopes of improved momentum trailed off in the second half of the year. By contrast, a year after SARS and sentiment in Asia has been positive with stock markets rising and currencies tracking the US dollar making assets that much cheaper."

The Indian market in comparison has not witnessed a leap in M&As. The highest deal value in 2004 is $ 378 million Hewlett Packard's buy out of Digital GlobalSoft (originally Compaq's Indian subsidiary) after which the combined entity acquired HP India's Software business.

In 2004, M&A activity was concentrated mainly in the telecommunication sector (21 per cent) followed by media, information and software (19 per cent) and industrial manufacturing (12 per cent). This was a significant shift from 2003, which witnessed significant deals in the chemicals, pharmaceuticals and oil & gas sectors.

Significant telecom deals included Reliance's acquisition of Flag Telecom in the UK, Idea Cellular's acquisition of Escotel, Bharti's acquisition of Hexacom and US-based Qualcomm's investment in Reliance Communications.