"Regardless of this drop, it is encouraging to witness a steady pipeline of deals pushed by distressed asset acquisitions, acquisitions to accelerate topline growth through new and attractive market segments and new capabilities, and divestment of non-core assets or businesses, particularly in capital-intensive industries.
Similar to deal values, volumes also witnessed a 28 per cent fall on the back of 37 per cent fall in domestic deal volumes (55 deals compared to 87 deals during same period last year)," he added. The second quarter of 2019 recorded deal values which were lowest in the last 7 quarters. The third quarter also saw average M&A deal size going up to $63 million from $48 million recorded in Q2 2019.
Overall YTD deal activity continued to witness weak performance both in terms of deal volumes and values as compared to the same period of 2017 and 2018 on the back of sluggish M&A deal activity in 2019 that recorded a 70 per cent fall in the deal values on account of absence of high-value deals compared to same period 2018 ($23.72 billion compared to $77.83 billion in YTD 2018) in addition to a 12 per cent fall in the M&A deal volumes (322 deals compared to 367 deals).
Manufacturing, energy, start up, pharma, banking, IT, infra and e-commerce sectors led the deal values in 2019, capturing 90 per cent of the total overall deal values. The tech sector, including IT&ITeS and startups – on the other hand – still continues to drive deal volumes capturing 37 per cent of the total deal volumes and garnering $ 4 billion through 119 deals.
The startup sector led the M&A deal values driven by Ritesh Agarwal’s acquisition of OYO rooms worth $ 2.24 billion, the largest deal for the quarter. The sector also remained active with 19 deals dominated by fin-tech, gaming, retail, data analytics, enterprise infrastructure and discovery platform segments.
This quarter was also dominated by M&A deals
in the IT and ITeS sector ($196 million in 22 deals), pushed by consolidation in the software development and IT solutions segment. Core sectors like energy, infra, banking, pharma and manufacturing also succeeded in executing high value deals with a view to build synergies, pare debt, for inorganic expansion, market capitalisation and divestment of non-core businesses amid stiff competition and uncertainties.
The quarter has witnessed high value deals executed in the energy sector (total of $1.28 billion during the quarter in 5 deals) with Adani Group’s acquisition of GMR Chhattisgarh and Essel Green Energy pushed by IBC helping the companies
repay their debts while other deals in this sector were executed to divest non-core non-performing assets.
Cross sector deals are on the rise with huge opportunities to build scale through adoption of robotics, artificial intelligence and other technology solutions.
"Finance Minister Nirmala Sitharaman's slew of measures including a rollback of the surcharge on foreign and domestic portfolio investors to increase consumer demand and investments, enhancing the liquidity of banks to shore up purchases by consumers, easing goods and service tax (GST) refunds to micro, small and medium enterprises and easing conditions for a beleaguered automotive sector are expected to boost the deal sentiment," said Pankaj Chopda, Director, Grant Thornton India LLP.