Low valuations perk up M&As

“We have witnessed a 28 per cent rise in the enquiries (meeting with board of companies) on merger and acquisitions over the last couple of months and the mandates have gone up by 17 per cent,” said Ashvin Parekh,national head,financial services at Ernst & Young.

Experts said that the valuations have plateaued with the sharp fall in markets,pushing prospective acquirers to call the shot as they do not want to wait any longer.

Over the last one month,Sensex has fallen by over13 per cent and has lost 21 per cent in the calendar year 2011.

The activity is particularly pronounced in sectors including IT,media and capital goods.

Market players say that the current scenario of high interest rates and a slowdown in demand has also turned a lot of companies from “possible targets” to “sure targets” as their businesses are under pressure,resulting in a natural merger or amalgamation kind of situation.

“We have also witnessed a rise in the number of companies coming to us for getting their valuations done from an acquisition point of view,” said Parekh.

Law firms that are closely involved with M&A activities also say that a lot of M&A deals are underway,some of which may fructify soon.

“The activity has gone up in both private and public merger and acquisition space and the number of enquiries in M&As in 2011 has substantially increased compared with 2008-09 and 2009-10,” said Nishchal Joshipura,head,M&A Practice Group at Nishith Desai Associates.

A leading M&A advisor said his company is close to finalising couple of large deals. But there are others who say that the pace of merger and acquisitions is still slow given the global market volatility.

“Only strategic deals are happening right now,” said Girish Vanvari,Executive Director,M&A,KPMG.