Fewer mergers in 2008 as companies hold on to cash

NEW DELHI: Not so long ago, it was highly fashionable to raise a toast to mergers and acquisitions, but champagne was mostly banned from boardrooms in 2008 as business expansion became a bad idea in an era of economic uncertainty.

The total number of M&A deals announced till December 15 stood at 445 and its combined value was $30.72 billion, according to global consultancy firm Grant Thornton said. It hardly a match to last year's 676 deals worth $51.11 billion.

Though the pace of global M&A is likely to slow down in 2009, largely due to the lack of credit, volatile equity markets and weak confidence among companies to pursue transactions, an unprecedented decline in valuations would spark some opportunistic buying, industry experts say.

"Deal Activity in India in 2009 would no doubt be impacted by the global economic slowdown. Key challenges are the lack of financing available for outbound transactions, and continued unreasonable valuation expectations in the private markets," auditing firm PricewaterhouseCoopers Executive Director / Partner, Transactions Group Sanjeev Krishan said.

Meanwhile, consultancy firm Dun & Bradstreet President & CEO India Manoj Vaish said: "At this point of time, financing is a major issue besides the restrictions in the external commercial borrowings have limited the foreign borrowings to finance acquisitions."

Vaish further added: "We expect the M&A market to reflect moderate activity in 2009 with the theme being more of consolidation and rebalancing of business portfolios than the aggressive growth intent in the past year".