Albeit muted for most part of the year, Deal Street in India has clocked M&As worth USD 29 billion in 2014 and expects the size to get larger with transactions worth over USD 40 billion in the new year.
Experts say that various reform measures promised by the new government, including on foreign investment caps, should accelerate the merger and acquisition activities in India in the new year which has remained somewhat subdued for last few years amid slackened economic growth momentum.
The Indian M&A activity in 2014 appears to have grown by a modest 9 per cent during 2014, as compared to 2013, according to global consultancy major PwC.
There have been little over 800 merger and acquisition (M&A) deals totalling USD 28.7 billion this year, as against about 850 deals worth USD 26.3 billion during 2013.
The most significant increase this year has been in the domestic M&A space which has almost doubled, while inbound and outbound M&As were down by 37 per cent and 75 per cent respectively.
The low outbound activity was largely because of stretched balance sheets of Indian companies, which are "under repair" at the moment, and hopefully a benign interest rate regime in 2015 would help, experts said, adding inbound activity suffered because most overseas investors are in wait mode for real reform activity before investing in India.
"Though in value and volume terms the increase was marginal, there has been a significant improvement in sentiments. There seems to be more deals in the pipeline and businesses are reviving their M&A plans," global deal tracking firm Mergermarket India Bureau Chief Mithun Varkey said.
Experts believe the uplift in sentiment is likely to boost M&A activity in 2015 as many deals that have been in the making over the last six months or so are expected to close or be announced in 2015. Moreover, the second half of 2015 would see the deal activity really pick up momentum.
"The year 2014 is ending on a very positive note with significantly increased interest in India. With the new government committed to large scale reforms and sustaining investor interest, we expect 2015 to be a very strong year in terms of deals/IPO's," Vikram Hosangady, Head, Transaction and Restructuring at consultancy firm KPMG said.
Opening of FDI in new sectors and enhancing limits in sectors such as Insurance will be helpful as would be the easing labour laws etc, experts said, adding the government has also launched the 'Make in India' campaign, but for it to have a positive impact it is critical that the ease of doing business in India goes up.
"If the government can bring in real reform, activity levels could pick up significantly. We would expect M&A growth rate to at least double in 2015 at the minimum and it won't be surprising if overall M&A activity crosses USD 40 billion next year," PwC India Partner and Leader - Private Equity and Transaction Services Sanjeev Krishan said.
