India Inc’s US buys slow down on liquidity woes

MUMBAI: Acquisitions of US companies by Indian firms have drastically fallen this year following lack of acquisition funding and an uncertain economic environment in the recession-hit country. There were only two US-bound transactions in the first two months of 2009 as compared to 10 transactions in the same period last year.

The two transactions in 2009 include Piramal Healthcare���s acquisition of inhalation division of RxElite and Cosmo Films��� takeover of GB Commercial���s print finishing business.

In 2008, Indian companies accounted for a total of 62 US-bound acquisitions with a cumulative transaction value of over $3.4 billion. This represents a 25% decrease over the 83 transactions in 2007 and a 66% decline in terms of transaction value, according to US-based investment banking firm Virtus Global Partners��� latest report on US-bound acquisition by Indian companies.

���A sharp decline in growth projections and a decrease in overseas trade owing to the global economic recession have forced Indian companies to put breaks on their global growth plans,��� Anil Kumar, managing director, Virtus Global Partners told ET.

Mega-sized deals in 2008 included Tata Chemicals��� acquisition of General Chemicals for $1 billion and GMR Energy���s purchase of 50% equity in Intergen for $1.1 billion.

In 2008, IT/ITeS remains the most acquisitive industry capturing over 55% share of the total US-bound transactions by volume, followed by healthcare (15%); manufacturing, media and real estate (5% each); and agriculture and mining (3% each). Other industries accounted for less than 2% each in terms of volume, the report said.

Deal sizes of less than $25 million accounted for 76% of the 2008 US-bound acquisitions by volume, followed by transactions in the $25 million to $50 million range (12%). This reflects the increasing pressure to gain scale amongst smaller companies. Most of the transactions involved acquisition of 100% stock for cash consideration. These transactions generally had an earn-out structure, where a portion of the deal value is paid on future milestones.