The year 2011 seems to have begun on a good note for merger and acquisition deals in India, as the first transaction of the year -- $1.22 billion acquisition of Patni Computer by US-based iGate -- has been a billion-dollar plus deal.
The previous year, 2010, was a record year in terms of the number of billion-dollar deals. In 2010, India Inc announced merger and acquisition deals worth a record $55 billion which also includes a nine billion-dollar-plus deals -- the highest-ever in a single year.
Experts expect India Inc's shopping spree will continue in the 2011 and IT sector might see further consolidation. Consultancy major PriceWaterhouseCoopers Associate Director Abhijeet Ranade said that consolidation is inevitable in the IT industry.
The first deal of the year has been from the IT space, where Patni Computer has been acquired by iGate along with private equity firm Apax Partners. However, some other experts feel that IT space might see less number of deals because there are very few companies.
On the other hand, they foresee consolidation in sectors like Telecom, textiles, financial services and healthcare.
"Overall M&A activity should be good but there will be very few deals in the IT industry because there are only 8-10 Indian companies in this space. We will witness billion dollars deals but small transaction will be seen," SMC Capitals Equity Head Jagannadham Thunuguntla said.
iGate, along with Apax Partners, purchased 45.6 per cent equity held by Patni brothers Narendra, Gajendra and Ashok and 17.4 per cent stake held by General Atlantic at a price of Rs 503.50 a share, costing $921 million.
The deal size, however, will go up to about $1.22 billion (more than Rs 5,400 crore), after acquisition of 20 per cent from public shareholders at the same price of Rs 503.50 a share through the mandatory open offer.
In 2010, the M&A landscape was largely dominated by India Inc's global ambitions, with Indian companies acquiring foreign assets worth $27.25 billion with a view to expand their market share -- as was seen in the case of Bharti-Zain -- while Reliance Industries, Tata, Jindal and Coal India also sought to acquire assets abroad to ensure consistent supply of raw materials on a long-term basis.
Other big-ticket transactions were the end of 26-year-old two-wheeler joint venture Hero Honda and JSW Steel's acquisition of an over 40 per cent stake in Ispat Industries for about Rs 2,157 crore (Rs 21.57 billion).