Corporate boardrooms remained abuzz with deal activities in 2016 with mergers and acquisitions worth over USD 52-billion and the tally may get even bigger in the new year on growing interest of global investors in the Indian businesses.
The surge in deal value this year was largely driven by big-ticket transactions and consolidation in many sectors, experts said, while adding that similar trends may continue going forward in 2017.
They said the new year looks promising in terms of domestic, inbound as well as outbound deals, but this outlook is dependent on macro-economic trends and reforms in sectors like infrastructure and power among others.
According to consultancy major EY, the total quantum of announced deal value for 2016 is estimated at USD 52.6 billion, sharply higher than USD 31.3 billion in 2015, though the deal count declined to 756 deals (from 886 deals in 2015).
"The M&A activity in 2017 is expected to stay positive owing to continued interest of financial and strategic investors in the Indian economy. Sectors like technology, life sciences and financial services are expected to attract significant investor attention in 2017," said Ajay Arora, Partner, Transaction Advisory Services, EY.
In the near term, experts believe, there could be some slowdown in M&A activity but in the medium to long term, demonetisation and GST will act as a catalyst to fuel increased deal activity over the coming years.
While experts are unanimous in M&As getting a further boost in the new year, some other major consultancies such as PwC and Grant Thornton pegged the 2016 deal tally lower at USD 44.6 billion and USD 35 billion respectively.
"GST could result in improved bottom line for most of the corporates which could improve valuations and it also removes bottlenecks in tax structure and makes it more efficient which would mean more savings for corporates and the benefits of which would be passed on to consumers as well," Mergermarket India Bureau Chief Savitha Kraman said.
Moreover, both the reforms are expected to shift the focus from unorganised sector to the organised sector and this in turn would add to the attractiveness of India as an investment destination.
Since the economic environment may be a bit volatile in 2017 owing to various domestic and global factors -- this could actually spur further consolidation in the domestic markets. This would include infrastructure and the core sectors, financial services as well as e-commerce businesses.
Pavan Kumar Vijay, Founder of Corporate Professionals, believes the government's digital push would certainly help the internet start-up companies. Paytm and similar companies playing on technology and helping India survive the cashless economy would be the biggest beneficiaries.
Regarding GST, he said "It would help in ease of business also but it is not likely to come before September 2017 and the first year of implementation would have its own challenges. So its benefits would be seen only after 12-18 months from now".
According to Prashant Mehra, Partner, Grant Thornton
India: "As GST and other important economic reforms play out in 2017, there is further rise expected in domestic M&A, driven by the need for consolidation in core sectors. Improvement in doing business rankings partly due to reforms and partly methodology, should further boost foreign investment in the wake of weak global markets."
PwC India transaction services leader Sanjeev Krishan, the outlook for the next year looks "healthy".
"We do expect overseas corporate buyer activity to pick up as well as India continues to be in focus within the emerging markets globally - industrials, chemicals, pharmaceuticals and technology likely to see greater inbound activity," Krishan said.
The year 2016 saw some large deals, specifically in the oil and gas sector including the Rosneft led consortium acquiring Essar Oil and consortium of Indian companies acquiring participating interest in Vankornoft oil field in Russia.
Some other sectors that saw large transactions of over USD 1 billion include pharmaceuticals, financial services, cement, media and power (both renewable and thermal).
Among the major M&A deals of this year include Flipkart -owned Myntra acquiring Jabong from Global Fashion Group -- a move that marked further consolidation in the country's booming e-commerce industry, the merger of Max Life and Max Financial Services with HDFC Standard Life Insurance Company, and Reliance Communications' mobile tower and other deals.
Besides, the year also saw an interesting trend of mergers between domestic groups (HDFC Life and Max Life, Videocon d2h and Dish TV) which has hitherto been a rare phenomenon in the Indian context, experts said.
In the New year while domestic transactions are likely to rise as highly leveraged companies would be compelled to sell their non-core business, which in turn would be lapped up by cash rich business house to scale up their presence.
The 'attractive' destination tag that India enjoys among emerging market economies, would lead to continued inbound deal activity in the coming year as well.
On the outbound deal activity front, the outlook could be influenced by how political and economic developments shape up across Europe, Uk and the US, experts said.
