The year 2005 will be remembered as India's year of mergers and acquisitions.
According to the latest study by KPMG, the country witnessed 52 per cent increase in M&A deals in the first 11 months of this year, against a global increase of 19 per cent during the period.
The 394 deals, mostly from the energy and telecom sector, accounted for a total of $10 billion (Rs 45,000 crore) this year. By number of deals, India was the fifth most targetted nation and the seventh most active acquirer in Asia.
The Indian utility and energy sector, ranked number one by value, saw 11 deals accounting for nearly a quarter of the total value of all the deals at $2.23 billion. The acquisition of Dabhol Power by Ratnagiri Gas and Power was one of the biggest this year.
The telecom sector came second with 21 deals valued at $1.8 billion followed by the IT sector with 57 deals and the healthcare & pharmaceuticals sector with 37. Though second in value terms, the telecom industry is likely to see more activity in the coming years, said experts.
Said Carlton Pereira, MD, corporate finance of KPMG India, "The Indian telecom sector is still at a nascent stage with tele-density being a little over 10 per cent, there is tremendous room for growth.
With the government also encouraging foreign participation by introducing various policy initiatives - foreign direct investment limits being boosted substantially to the extent of 74 per cent in a large number of sectors, the industry expects to see more consolidation and foreign investment going forward."
The computer & electronics sector, growing at a substantial rate with its contribution to the gross domestic product at about 4.1 per cent, increasing from 1.9 per cent in 2000, saw the largest number of deals this year.
KPMG attributed the activity in the healthcare & pharma sector to the increasing number of cross-border acquisitions, especially in the US and Europe.
India's contribution to the global M&A activity was about one per cent by deal value - 394 deals valued at $10 billion, witnessing a 52 per cent rise in the number 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 $5.72 billion in 2004.
Pereira noted that the cross-border M&A activity has 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.
The largest inbound deal seen in 2005 was the acquisition of a 67 per cent stake in Ambuja Cement India by the Swiss major Holcim for $810 million as against the largest in 2004 being the acquisition of a 49.4 per cent stake in Digital GlobalSoft by Hewlett-Packard for $302 billion.
Outbound deals also saw the same trend, the largest being the acquisition by Matrix Laboratories of the Belgium Docpharma SA valued at $313 million as against the acquisition of FLAG Telecom Group by Reliance Industries for $211 million.
Domestic M&A activity was also very high at 231 deals valued at $7.16 billion in 2005 compared with 144 deals valued at $2.53 million in 2004, witnessing a 185 per cent increase in deal value and a 60 per cent increase in the number of deals.