Corporate India witnessed slower deal activity in October, primarily due to absence of big ticket transactions with total M&A value remaining at USD 3.7 billion for the month, a study said today.
Total M&A value stood at USD 3,775 million in October, sharply lower than USD 17,321 million in year-ago month, as per Grant Thornton's M&A Dealtracker report.
In October, M&A deal value recorded a 4.6-fold decline, mainly due to high valuation of October 2016 deals such as Rosneft PJSC, Trafigura, and United Capital's USD 12.9 billion acquisition of Essar oil.
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However, as compared to September this year, deal activity in October demonstrated a significant growth with 4.7-fold in deal value driven by one billion-dollar deal, even though volumes remained muted, the report said.
"October (M&A and private equity) witnessed over 90 transactions valued at around USD 5.3 billion. This was a decline from the same period last year but that was primarily because of some big ticket transactions in October 2016 such as Rosneft PJSC, Trafigura and United Capital's acquisition of Essar Oil," said Prashant Mehra, Partner, Grant Thornton India LLP.
Both domestic M&A and cross-border deals were subdued this month and the reason seems to be that industry being busy dealing with the implementation issues around GST, Mehra said.
From sector perspective, banking, financial services and insurance (BFSI) seems to be the major contributor to M&A transactions, contributing USD 2.6 billion of the USD 3.8 billion in October.
Mehra said the deal activities should now start going up with India gaining 30 positions up on the Ease of Doing Business, further reforms for uplifting this ranking, effects of past reforms finally showing a positive impact on the economy and the stock market gradually ticking upwards.
"While we will hopefully end 2017 on a high note, traction will perhaps be concentrated around core sectors," Mehra said.
Overall deal activity (M&A and PE) year to date saw a marginal increase of 3 per cent in deal values recording deals worth USD 53 billion, while volumes declined by 24 per cent (973 deals) amidst uncertainty in the deal environment on account of economic reforms like GST and the bankruptcy code, the report said.
M&As year to date witnessed three deals in the billion- dollar category and 34 deals estimated at USD 100 million- plus, compared to eight billion-dollar deals and 37 deals valued at USD 100 million-plus executed in 2016.
Absence of big ticket transactions compared to 2016 have resulted in 10 per cent decline in the deal values. While deal volumes are yet to match the levels witnessed in YTD 2016.
Telecom, banking, ecommerce, energy and manufacturing sectors brought in large deals in year to date, contributing over 86 per cent of total values, while volumes continued to be dominated by the start-up sector contributing 22 per cent of volumes followed by IT and ITeS (17 per cent).
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