Merger &Acquisition hit a downfall of 65%

Merg­ers and acqui­si­tions deals in India have dropped 65 per cent sequen­tial­ly to $4.7 bil­lion in the quar­ter end­ing Sep­tem­ber, accord­ing to Merg­er­mar­ket, a glob­al M&A intel­li­gence ser­vice provider. Deals in the quar­ter were 20 per cent low­er than $5.9 bil­lion in the year-ago period.

M&A deals in 2014, how­ev­er, reached $21.7 bil­lion, up 22.5 per cent from the same peri­od last year. The July-Sep­tem­ber quar­ter, amid a ral­ly on the stock mar­kets, crip­pled the momen­tum that had built up in the first six months of the year. The BSE Sen­sex has gained 11 per cent since elec­tion results were announced in May.

“There is anoth­er avenue for rais­ing mon­ey, so pro­mot­ers are tak­ing stock,” said San­jay Bhan­dark­ar, man­ag­ing direc­tor, N M Roth­schild & Sons (India). “The eco­nom­ic envi­ron­ment has changed from gloom to opti­mism, so unless it is a des­per­ate sit­u­a­tion pro­mot­ers would like to explore oth­er options before get­ting into an M&A trans­ac­tion,” he added.

Also 2014 has been bad for inbound deals which at $10.2 bil­lion mark a five-year low. Inbound M&A deals in Jan­u­ary-Sep­tem­ber 2013 were worth $12.1 billion.

“A few deals are held up over pric­ing,” said Anjali Pira­mal, head of strat­e­gy for the Asia Pacif­ic at Merg­er­mar­ket. “As val­u­a­tions of list­ed play­ers improve, pro­mot­ers of pri­vate com­pa­nies could hold on for bet­ter prices.”

Sec­tors such as e‑commerce have already seen frothy val­u­a­tions reflect­ed by peers abroad. But Man­isha Giro­tra, chief exec­u­tive offi­cer of Moelis & Com­pa­ny in India, says,” Cer­tain­ly, the val­u­a­tion expec­ta­tions have gone up with the re-rat­ing of the econ­o­my, but the issue is not as much at sell­er side as at the buy­ers. FDI (for­eign direct invest­ment) is not hap­pen­ing and we need to con­vince the incom­ing investors about our pol­i­cy sta­bil­i­ty and oth­er reg­u­la­tions,” she says.

Nat­u­ral­ly there is a lot more expect­ed from the new gov­ern­ment on pol­i­cy front. “There is a wait-and-watch approach to see how poli­cies roll out, hence inbound deals are delayed,” said Ajay Saraf, exec­u­tive direc­tor at ICICI Secu­ri­ties. “We see a lot of inter­est in the India-Japan cor­ri­dor after the vis­it of Prime Min­is­ter Naren­dra Modi and expect inbound deals to revive from next year,” Saraf added.