M&A slumps 30% in Jan-Mar; Morgan tops with RIL-BP deal
Majority of the markets might not be promoter driven, but certainly there is enough scope to do deals in those areas,” says Aisha Sequira of Morgan Stanley.
By ET Bureau | Updated:
MUMBAI: India’s mergers and acquisitions tumbled 30% in the first quarter of 2011 as steep valuations and rising uncertainty about macroeconomic factors such as interest rates, fiscal deficit and rising current account deficit turned corporates cautious. Morgan Stanley, which topped the table last year, maintained its leadership with a role in the biggest stake purchase in the first quarter of the calendar year when BP agreed to buy a 30% stake in the oil & gas fields of Reliance Industries for $9.8 billion.
Quarterly takeovers fell to $16.6 billion from the previous year, which was inflated by the nation’s second biggest cross-border takeover of Zain Africa by Bharti Airtel, a report by Thomson Reuters shows. But bankers believe that deals may return as corporate confidence grows due to global economic recovery. “We see a strong M&A market even this year.
Majority of the markets might not be promoter driven, but certainly there is enough scope to do deals in those areas,” says Aisha Sequira of Morgan Stanley. i-Gate’s purchase of Patni Computer for about a billion dollars along with buyout firm Apax Partners, and Nippon’s agreement to buy a stake in Reliance Life are among the other transactions in the quarter. The number of deals fell to 243 from 416 in the first quarter of 2010.
The laggards have been private equity players. PE investment this quarter has collapsed 80% compared with the previous year, with PE’s contributing $147 million. This is the slowest quarter for private equity players since 2002. PE players feel India’s consumption market is still strong, and they do not have any pressure to close on deals. Resources may dominate future activity, since nations with natural resources constraints offer great potential for development and profitability in the long run. The London-listed Vedanta Resources is awaiting government clearance to buy a controlling stake in oil explorer Cairn India, a unit of Cairn Energy UK.
“Large deals cannot happen in services or healthcare. The only space which we think will see a billion-dollar deals would be commodities ,” says CG Srividya, partner specialist advisory, Grant Thornton . “We might not see billion-dollar deal this year, but M&A activity certainly looks robust.” The $10-billion Bharti-Zain deal was one of the largest acquisitions of 2010, but this year, analysts predict acquisitions in the telecom sector will be negligible. This quarter, the sector has seen no mergers or acquisitions . But Morgan Stanley feels the report does not reflect the current scenario in the M&A market.
Quarterly takeovers fell to $16.6 billion from the previous year, which was inflated by the nation’s second biggest cross-border takeover of Zain Africa by Bharti Airtel, a report by Thomson Reuters shows. But bankers believe that deals may return as corporate confidence grows due to global economic recovery. “We see a strong M&A market even this year.
Majority of the markets might not be promoter driven, but certainly there is enough scope to do deals in those areas,” says Aisha Sequira of Morgan Stanley. i-Gate’s purchase of Patni Computer for about a billion dollars along with buyout firm Apax Partners, and Nippon’s agreement to buy a stake in Reliance Life are among the other transactions in the quarter. The number of deals fell to 243 from 416 in the first quarter of 2010.
The laggards have been private equity players. PE investment this quarter has collapsed 80% compared with the previous year, with PE’s contributing $147 million. This is the slowest quarter for private equity players since 2002. PE players feel India’s consumption market is still strong, and they do not have any pressure to close on deals. Resources may dominate future activity, since nations with natural resources constraints offer great potential for development and profitability in the long run. The London-listed Vedanta Resources is awaiting government clearance to buy a controlling stake in oil explorer Cairn India, a unit of Cairn Energy UK.
“Large deals cannot happen in services or healthcare. The only space which we think will see a billion-dollar deals would be commodities ,” says CG Srividya, partner specialist advisory, Grant Thornton . “We might not see billion-dollar deal this year, but M&A activity certainly looks robust.” The $10-billion Bharti-Zain deal was one of the largest acquisitions of 2010, but this year, analysts predict acquisitions in the telecom sector will be negligible. This quarter, the sector has seen no mergers or acquisitions . But Morgan Stanley feels the report does not reflect the current scenario in the M&A market.
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