M&A deal volume at 7-yr high in 2017 with 1,022 transactions:EY

Corporate India's merger and acquisition (M&A) deal volume touched a seven-year high in 2017 with 1022 transactions, and the outlook for this year looks promising as well, says an EY report.

As per EY's latest Transactions Annual report released today, Indian M&A ended the year 2017 with 1,022 deals with a disclosed value of USD 46.8 billion.

While the deal volume reached a record high (as compared to 895 deals in 2016) since 2010, the deal value was lower by 12 per cent from USD 53.2 billion in the previous year, it said.

Primary deal drivers for the year were aimed at market expansion and entry into new markets, digital disruption and sector convergence, the report added.

 

India recorded a healthy M&A activity in calendar year 2017. While there was an increase in the number of deals, they were concentrated in the lower bands . The big ticket deals were fewer in number in 2017 when compared with 2016 as corporates held back from venturing into big ticket acquisitions.

"In addition, the timeline of some of the big-ticket deals got stretched due to increased scrutiny by the regulators and complex deal structures.," said Amit Khandelwal, Partner and National Leader, Transaction Advisory Services, EY.

Sector-wise, telecom led with the highest yearly deal value (USD 14.7 billion) recorded in the last 10 years a more than five-fold increase as compared to 2016.

The momentum in volume of deals is expected to sustain in the coming year as the government chalks out a comprehensive reforms plan for 2018 to improve the business and investment climate.

Sectors like technology, life sciences and financial services are expected to attract significant investor attention, Khandelwal said.

The report said that India's M&A outlook for 2018 looks promising on the back of a stable macroeconomic environment, positive deal fundamentals and buoyant business confidence.

In addition to traditional M&A drivers, such as consolidation and market penetration, deal activity will be increasingly triggered by disruptive pressures, such as technological innovation and digitalization, which will continue to redefine growth priorities, it added.

It is expected that the domestic market will be at the forefront of deal activity, as bigger players will adopt the inorganic route to expand/consolidate their market positions to better cater the recovering local consumption. In addition, the divestments by highly leveraged players will also continue, with the implementation of IBC pushing the early resolution of such stressed cases, the report said.

In terms of cross-border activity, a sense of caution is likely to prevail in this year as well, given the global geopolitical uncertainty and volatile trade dynamics, it said.

Domestic deals continued to dominate the Indian M&A landscape as home-grown companies preferred the inorganic route to achieve growth.

In terms of volume, the year saw 682 deals constituting around 67 per cent of the total deal volume. The domestic deal value stood at USD 37.9 billion, accounting for more than three-fourth of the total disclosed value, a first-time phenomenon ever in the Indian M&A deal market.

The year saw 340 cross-border deals with a cumulative disclosed deal value of USD 8.9 billion. This translates into a 7 per cent decline, in terms of deal volume, compared with 2016, while cumulative deal value slumped by nearly 71 per cent over the same period, the report added.