India Inc's US buys slow down on liquidity woes
Acquisitions of US cos by Indian firms have fallen this year following lack of acquisition funding and an uncertain economic environment. 10 most admired cos | Top 10 Wealthiest CEOs
By Rajesh Unnikrishnan, ET Bureau |
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.
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.
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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.
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