Deal Street: It’s raining M&As for India Inc

India's deal street is humming with activity. India Inc witnessed 394 mergers & acquisitions (M&A) valued at $10 billion in 2005, a 52 per c...

India’s deal street is humming with activity. India Inc witnessed 394 mergers & acquisitions (M&A) valued at $10 billion in 2005, a 52 per cent rise in the number of deals, and a 75 per cent increase in the value of deals over last year.

The Indian M&A scenario has seen an inflection point in its upward trend, seeing volatile movement between 2000 and 2004, reaching a high of 440 deals valued at $9.75 billion in 2000 and falling to a low of 259 deals valued at $5.722 billion in 2004, according to an analysis by KPMG Corporate Finance, based on data supplied by Dealogic.

The Indian utility and energy sector, ranked number one by deal value, saw 11 deals valued at $2.23 billion, including the largest deal in the country — acquisition of Dabhol Power by Ratnagiri Gas and Power — in 2005 compared to 16 deals valued at $350 million in 2004.

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The telecom sector, regarded to be one of most deregulated telecom markets in the world, was second with 21 deals valued at $1.8 billion of which 4 attributed to the top 25 deals in the country, together valued at $1.45 billion.

The computer and electronics sector, growing at a substantial rate with its contribution to the GDP at about 4.1 per cent in 2005, increasing from 1.9 per cent in 2000, saw 57 deals in the last year – the largest number witnessed by any Indian sector.

The Indian healthcare sector, followed the computer and electronics sector, with 37 deals in the last year. There have been an increasing number of cross border acquisitions especially in the US and Europe. Two of the largest cross border deals in the space were the acquisition by Matrix Lab of the Belgium Docpharma SA and the acquisition of the American Novus Fine Chemicals by Malladi Drugs & Pharmaceuticals Ltd.

KPMG said that cross-border M&A activity had been very high. There were 163 inbound acquisitions in India valued at $2.83 billion, dominated by the US accounting for 54 deals valued at $430 million, followed by the UK with 21 deals valued at $260 million.

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The largest inbound deal seen in 2005 was the acquisition of a 67 per cent stake in Ambuja Cement India Ltd by the Swiss Holcim Ltd for $810 million. Outbound deals also saw the same trend, the largest being acquisition by Matrix Laboratories Ltd of the Belgium Docpharma SA valued at $313 million.

Domestic M&A activity was also very high at 231 deals valued at $7.16 billion in 2005 as compared to 144 deals valued at $2.53 million in 2004, a 185 per cent increase in deal value and a 60 per cent increase in the number of deals.

By number of deals, India was the fifth most targeted nation and the seventh most active acquirer in Asia in 2005. Says Ian Gomes, Country Managing Director, KPMG India: “Last year KPMG reported a turning point in what had been a declining market. The continued growth in 2005 proves this was no temporary blip.”

The survey excludes strategic stake sales, like Bharti’s 10 per cent selloff to Vodafone.