Banks eye small sector M&A

As marquee investment banks Morgan Stanley, UBS, Rothschild, Goldman Sachs and others chase big-ticket deals in India, a clutch of boutique investment banks are looking to tap the opportunity in the lucrative small and mid-sized market as SMEs (small and medium enterprises) look to ramp up fast through mergers and acquisitions, initial public offerings, and private equity funding.

Delhi-based Almondz Global Securities has tied up with Noble, a London-based investment bank to set up an FII (foreign institutional investor) desk, and to help Indian companies raise money abroad through primary equity offerings like American Depository Receipts, Global Depository Receipts and London listing (including the Alternative Investment Market and main London Stock Exchange).

Another UK-based investment bank, Collins Stewart, has a tie-up with India's Inga Advisors to tap the small to mid segment of the market.

Recently, SBI Capital Markets inked an agreement with M&A International, a leading player in mergers and acquisitions for mid-market M&A transactions.

Another major financial services player India Infoline entered into a strategic alliance with Marchmont International for providing corporate finance advisory to SMEs in the area of Mergers and acquisitions, private placement, IPOs and high-yield debt. Last year, Worbus Management Consultants, a Pune-based company started its investment banking services targeted at small and medium enterprises.

Almondz Global's tie-up will focus mainly on mid size companies who want to raise money through a fresh equity offering. It will also help companies in mergers and acquisitions and provide strategic advisory and transaction services, its officials said.

Small and mid-market segment, where deal size ranges between $5 to $20 million, has no interest for Wall Street biggies, which look at deals anything between $100 million to over $1 billion on an average. There is no reliable estimate on the size of the small and mid-sized market.

Navjeet Singh Sobti, executive vice chairman, Almondz said: "We are mainly looking at SME space at this point of time as we think this is one of the main growth areas. There are many SMEs in India who have the capability to graduate to the next level. But capital is the main constraint for these companies and we will help them by providing advisory services for the same."

"We don't want to be in the league of Morgan Stanley, Goldman and UBS as we will be focusing on a different segment. Almondz will not be looking at companies, which have a multi million dollar appetite but small companies with an urge to grow and expand their business."

Ajit Menon, head of Investment Banking at India Infoline said, "It is a growing sector. There is lot of significant activity happening in this sector. Small and medium Enterprises mainly look for capital and management experience which we provide them with. These companies are largely underserved because either many of them are unlisted or don't have the adequate capital. Now-a-days even mid size companies are showing a very healthy growth appetite. They are ready to acquire companies abroad or even raising money through equity. So, there is huge opportunity in this sector which we are trying to cater to."

India Infoline has done seven deals, one of them being a private equity deal for Ordyn Technologies.

Diwesh Desai, director of Singhi Advisors, another player in the segment, says, "Small and mid-size companies need more advice than large companies because they are at an early stage of growth. Big companies have strong in-house teams, but small companies are not very well conversant with international trends and standards."

Singhi Advisors is the India partner for Merger Alliance, a leading international network of independent investment banking boutiques and corporate finance advisory firms offering seamless services on mid-market transactions.

It has done a fund raising exercise abroad for SMC Global, a financial services company. It has also helped a mid-size Indian company acquire a Dubai-based writing instruments company.