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M&A landscape in India witnesses big boost in 2016

M&A activity witnessed a whopping 75 percent jump from 2015; PE investments declined for the first time in four years

Paramita Chatterjee
Published: Jan 27, 2017 12:14:09 PM IST
Updated: Jan 27, 2017 12:20:10 PM IST

M&A landscape in India witnesses big boost in 2016(Image: Shutterstock - for illustrative purposes only)
Some hits and some misses – on one hand, while the mergers and acquisitions (M&A) market looked up in 2016 leaving the investor fraternity a happy lot, private equity (PE) and venture capital (VC) activity witnessed a slowdown, leaving fund managers gasping for more.

The M&A landscape in India witnessed a big boost in 2016 with the return of some big-ticket transactions that led to the overall M&A values being the highest in the last five years. As per data available with assurance, tax and advisory firm Grant Thornton, as many as 516 M&A deals were sealed worth $48.5 billion between January and December 2016. In terms of value, this is a whopping 75 percent jump from 2015 and signals a wave of consolidation, specifically in energy and natural resource, manufacturing and telecom sectors.

Here is a further break-up of numbers: In 2016, there were around 10 deals joining the billion-dollar club compared to only four such deals in 2015.

“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,” said Prashant Mehra–partner at Grant Thornton India. “Improvement in ease of business rankings, partly driven by reforms and partly by methodology, should further boost foreign investment in the wake of weak global markets,” he added.

In terms of private equity and venture capital activity, however, investors did not have as smooth a run as in 2015 that was considered a bumper year of investments for fund managers driven by startup investments. In 2016, PE investments declined for the first time in four years with nearly a 1,000 transactions contributing just below $14 billion in values. Although the volume of transactions remained almost the same as 2015, the transaction values reduced by 12 percent due to the absence of large-ticket transactions resulting in reduced average deal sizes. In terms of numbers, 2016 witnessed as many as 971 PE/VC deals as against 1,045 transactions in 2015. And in terms of the spread, startups evidently continued to dominate both in terms of deal values and deal volumes contributing 70 percent to transaction volumes.

“We are currently witnessing an uncertain environment as a result of significant economic and political developments in economies across the globe; as a result, valuations and consequently private equity activity has been circumspect,” said Rajesh Kairajani, lead partner for Transaction Support Services at KNAV.

Going forward, PE/VC investments may remain subdued as fund managers are expected to adopt a cautious approach towards fresh funding, specially in startups. Deals will bounce back only if big-ticket transactions happen in other areas.

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