India has recorded 343 mergers and acquisition deals, totalling $18.2 billion in 2005, of which $16.2 billion was through acquisitions and $2 billion via private equity investments.
The country has witnessed 192 cross-border transactions valued at around $10 billion, with the telecom industry leading the pack with 14 M&A deals valued at $5.4 billion.
The value of private equity deals rose 85 per cent in 2005 over the previous year with several international funds setting up "large corpuses for India-focused investments", according to a study by global deal advisory firm Grant Thornton.
The telecom sector was the biggest sector in 2005 in terms of M&A deal value accounting for a third of the total deals. Most of the deals were domestic (both acquirer and target companies being Indian), while there were two outbound cross-border deals and three-inbound deals.
Telecom was one of the few sectors with a higher proportion of domestic deals, with majority of them occurring in the mobile telephony space.
The deals with higher valuation multiples were Vodafone's investment of $1,500 million in Bharti Tele-Ventures, Maxis' acquisition of Aircel for $1,080 million and Essar Group's takeover of a controlling stake in BPL Communications for $1,155 million. The average revenue multiple (purchase consideration/revenues) for these deals was over eight.
Singapore Telecom's acquisition of a 5.85 per cent stake in Bharti Telecom for $252 million, VSNL's takeover of Teleglobe International Holdings for $239 million, Indian Rayon's buyout of a 16 per cent stake in Idea Cellular for $150 million and Essar Group's purchasing a 3 per cent stake in Hutchison Essar Telecom for $146 million were the other top deals. The average revenue multiple for these deals was 2.5.
The year 2006 is also expected to be good for M&A activities in the country, as the first two months of the year clocked deals worth $3.5 billion.
Following last years trend, cross-border deals constituted 78 per cent of the total M&A. Outbound deals were valued at over $2.2 billion and was 63 per cent of the total deal value.
Some of the major outbound deals included ONGC Videsh's acquisition of a Brazilian oil field for $1.4 billion, Dr Reddy's takeover of Betapharm, Germany, for $570 million and United Phosphorous' buy of Advanta Netherlands for $119 million.
According to Grant Thornton, there were 32 private equity deals valued at over $400 million in January and February 2006.