The year 2005 was indeed a great year for merchant bankers. A total of 467 M&A and private equity deals took place in 2005 valued at $ 18.2 billion recording a significant growth of 48 per cent over the previous year, according to the annual survey of corporate activities carried out by Grant Thorton.
M&A deals have grown at 46 per cent to reach $16.3 billion and PE deals have grown 85 per cent to reach $ 2 billion. The average deal size is at around $40 million and there were more than 25 deals with deal value of over $100 million.
There has been considerable activity in cross-border deals (totalling 192), which are valued at $ 9.5 billion and account for 58 per cent of all M&A deal value. The number of outbound deals from India is 2.5 times the number of inbound deals into India whereas the average inbound deal is three times the value of an average outbound deal.
The telecom sector basked in the limelight during the year. It has garnered the maximum - one-third of the total M&A deal value.
Pharmaceutical, healthcare and biotech saw the maximum private equity investments at 18.4 per cent of the total private equity investment. IT/ITeS sector has had the maximum number of both M&A and private equity deals at 80 and 22 respectively.
Analysisng this trend, H V Harish, Head of Mergers and Acquisitions, GT India said: "There are more outbound deals (Indian business acquiring international companies) than inbound deals both in value and volume terms. While Indian companies have acquired several businesses overseas to get an international footprint, most of these outbound deals have been lower value deals showing that Indian business are treading carefully."
The largest proportion of outbound acquisitions have been in Europe (50 per cent of deal value), followed by North America (24 per cent of deal value). US and UK are the two countries that garnered the maximum outbound deal share at 35 per cent of deal value, he added.
Commenting on the record year for M & A in India with an average of nine transactions per week and the year ending with a $1 billion transaction on the last day of the year, Harish said: "The key drivers were stock market valuations. This is obviously linked to the optimism in the economy and corporate profits. These two created a confidence in corporates to aggressively go after M&A as a key part of their growth strategy."
He added: "The consolidation factor, globally regarded as a key driver for M&A, will play a crucial role in this deal frenzy going forward. Even today, there are over 2,000 software companies, over 500 paper mills, over 5000 pharmaceutical units and over 1000 packaging companies in India. There is a clear path for consolidation of some of these establishments."
He added that management buyouts will reach double digits in terms of number of deals and one can also see some hostile acquisitions.
In addition, many more transactions and higher value of transactions, increased private equity investments and continued trend of cross border deals will be witnessed during 2006.
Surging ahead
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M&A deals have grown at 46 per cent to reach $16.3 billion and PE deals have grown 85 per cent to reach $ 2 billion.
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Average deal size at around $40 million with more than 25 deals having value of over $100 million
- Cross-border deals at 192 are valued at $9.5 billion, account for 58 per cent of all M&A deal value
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