M&A, PE/VC activity crossed $100-billion mark with 1,640 transactions

Going into the new year, margin pressures, consolidation drive and targets to acquire new product portfolio are seen driving M&A in sectors, including information technology and IT-enabled services, consumer and retail, energy and natural resources and manufacturing sectors. According to analysts, the primary drivers behind India’s record M&A activity in 2018 was the biggest e-commerce deal in the country – Walmart acquiring majority stake in India’s largest online retailer Flipkart for $16 billion; along with the biggest consumer goods deal – which saw Hindustan Unilever merge GlaxoSmithKline Consumer Healthcare with itself in a transaction worth approximately $4.5 billion.

Other major sectors contributing to the M&A activity were telecom, manufacturing and energy.

These include deals such as merger of Indus Towers into Bharti Infratel at a deal value estimated at $14.6 billion. Another major deal in the telecom sector was Reliance Jio’s acquisition of certain businesses of Reliance Communications for an estimated $3.7 billion.

In the energy and manufacturing sectors, upstream company Oil and Natural Gas Corporation (ONGC) acquired controlling stake in oil retailer Hindustan Petroleum Corporation (HPCL) for $5.78 billion. This was followed by Tata Steel’s 73 per cent acquisition of Bhushan Steel for $5.51 billion.

“The aggregate value of M&A and PE/VC deals reported crossed the $100 billion mark, which is the highest in the last twelve years. M&A transactions on standalone basis reported transactions aggregating to $88.5 billion. Telecom, e-commerce, manufacturing, energy and consumer and retail sector led the M&A deal activity in terms of values, while start-ups, IT, manufacturing, pharma and banking sectors were active in 2018 driving the deal volumes,” said Pankaj Chopda, director, Grant Thornton India.

Explaining the rationale behind high activity in some of these sectors, he said that creating liquidity by monetising non-core assets, consolidation to strengthen the market position and entering new geographies have been some key drivers behind big ticket transactions in 2018.

“Technology continues to play a key role in the way businesses are being managed and experiences are created for its customers and consequently start-ups that are focused on providing such technology solutions are witnessing a line-up of strategic transactions from the corporate fraternity,” Chopda said.

Sectors such as defence, aerospace, pharmaceuticals, financial services, media and entertainment, and food processing, Chopda said, have “complex rules and guidelines, which if eased or simplified, could accelerate the inbound mergers and acquisitions”. However, analysts also pointed out that some caution could be exercised by the corporate sector in going ahead with M&A deals due to political uncertainty, at least till the 2019 general elections.