How is the Indian economy faring for the moment? Well, there are expectations that it will continue to rise if the mounting quarterly numbers are taken into account but there are other anxieties as well. Reason? Even though there is an aroma of optimism, India Inc. is not content of the development and decline in mergers and acquisitions have added its anguishes. As per studies, both M&A and private equity deals, during the first half of 2009, witnessed a drastic fall in comparison to the same period in previous years.
Let’s get more specific, it may elucidate the existing reality. It has come to the knowledge that the total value of deals (M&A and PE) announced in the first half of 2009 was US$7.81 billion as against US$ 23.02 billion and $50.75 billion in 2008 and 2007 respectively. The total number of M&A deals announced during H1 2009 stands at 123 with a total announced value of US$4.93 billion.
As per experts, the dearth of cross-border deals has been mostly responsible for this debacle. Cross-border M&A deal values have fallen from US$42 billion in H1 2007 and US$12 billion in H1 2008 to merely US$1.4 billion in H1 2009 registering a fall of more than 85% over the same period last year. Moreover, as indicated by latest Grant Thornton – Dealtracker Half Yearly Issue, domestic deals have continued to remain upbeat with deal values clocking US$3.5 billion in H1 2009 compared to US$4.3 billion in H1 2008.
Commenting on this, K Subramanian, Director, Deloitte Haskins and Sells, said, “In 2007-2008 deals were basically inked with an objective of ‘buy and grow’. But in 2009 especially after the financial Tsunami, deals are driven by three – pronged motives: consolidation among group companies, cash repatriation, and EPS management. This makes the difference between H1 2009 deals and previous years’ deals.”
The total number of PE deals announced during the first half of 2009 is fixed at 93 with a total announced value of US$2.89 billion as against US$6.93 billion (185 deals) in H1 2008. The first half of 2009 has seen private equity investment in offbeat sectors such as microfinance, education and clean tech in addition to several media related sectors.
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