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Inbound M&A Facts

January-July15
Source: Mint

Inbound M&A deals on course to hit a fouryear high this year

70

inbound

M&A

transactions

worth

almost

$10.19 billion were sewn up, compared with 165


deals valued at $11.22 billion closed in all of 2014

Sectors such as IT, e-commerce, pharmaceuticals


and healthcare, and manufacturing are seeing
the maximum deal activity.

Inbound merger and acquisition (M&A) transactionsstake purchases in


local companies or Indian-owned foreign assets by overseas entities
are on track to hit a four-year high in 2015 as foreign strategic investors
seek to tap an expected rebound in Asias third-largest economy.

Between January and July, 70 inbound M&A transactions worth


almost $10.19 billion were sewn up, compared with 165 deals
valued at $11.22 billion closed in all of 2014, according to data
from Grant Thornton LlpsDealtracker report.

Inbound transactions made up half the overall M&A deal value of $20.34
billion in the January-July period. Overall, 322 deals worth $20.34
billion have been closed this year.

This years transaction value does not include large


inbound deals like Russias OAO Rosnefts agreement to buy
a 49% stake in Essar Oil Ltd because financial details of the
purchase have not been disclosed by the companies. BNP
Paribas SAs decision to buy domestic brokerage Sharekhan
Ltd has also not been included in the tally for the same
reason.

Reasons

gradual

improvement

in

terms

of

government

policies

and

investments is boosting the sentiment towards investing in the country.

More reasonable valuation expectations and the need for global


investors to diversify away from markets like China, where growth is
slowing, have also spurred this years deal activity apart from an
expected rebound in economic growth that slowed in recent years.

Improved sentiment around the business environment in India, a


slowdown in competing markets like China and easy global liquidity are
among the factors that have spurred renewed investor interest in India.

Facts

The biggest inbound acquisition this year has been Centerbridge Partners Lps
purchase of SuzlonLtds German subsidiary Senvion SE for $1.2 billion. This
was followed by Reliance Industries Ltds sale of 50% stake in Eagle Ford Shale
in

the

US

for

almost

$1.07

billion.

Harman

International

Industries

acquisition of software, mobility and analytics firm Symphony Teleca Corp.


for $780 million was the third biggest inbound deal in the year to date.

Mylan Inc.s acquisition of Famy Care Ltds women health care business for $750
million

and

Alibaba

Groups

minority

stake

acquisition

in

One97

Communications Ltd (which owns Paytm) for $575 million have been other significant
deals.

Globally, M&A transactions are close to touching the record high of $3 trillion seen in
2007. According to a 14 August report by Reuters, global M&A activity has already
reached $2.9 trillion this year.

Road Ahead

India is the top priority for several Japanese manufacturing


firms.

Valuation expectations of Indian firms have also moderated,


allowing for deals to close.

The valuation expectations among companies have been


re-calibrated and sellers are willing to consider more
realistic valuation expectations for their businesses.

The average P/E (price to earnings) multiple is around 18, which is considered a
good point for entry. It reflects a good opportunity going forward and also reflects
healthy earnings

Sectors such as information technology (IT)/IT-enabled services (including ecommerce), pharma-healthcare and manufacturing are seeing the maximum deal
activity. Foreign investor interest in core infrastructure sectors is still limited.

Skepticism exist on the infra side, especially in the power sector where coal linkage,
power purchase agreements and evacuation of power still remain a challenge.
Financial restructuring of assets and lower interest rates will help the sector.

Overall, for the M&A and investment environment to improve, resolution of


land bill, power, and the goods and services tax are the most important
steps going ahead.