Private equity deals appear to be back on track even as strategic acquirers seem to be holding back after the market meltdown in January dented corporate valuations. According to data for March, the number of PE deals jumped 20% compared to February, while strategic mergers and acquisitions (M&As) continued to shrink.
As many as 34 PE deals were announced in March, compared to 28 in the previous month. While PE deals have picked up, large deals have dried out. Just one $100 million-plus deal was inked during the month against 7-8 such deals each during January and February, according to the latest deal tracker of advisory firm Grant Thorton.
This is also reflected in the cumulative value of PE deals, which is down by almost half at $960 million, from $1.73 billion in February. The data collates the value of announced deals and would be higher than the actual PE fund flows as some transactions take time to close. The largest PE deal in March saw Singapore’s Orient Global Tamarind Fund picking 2.6% stake in Cairn India for $278.7 million.
Interestingly, even as concerns of an asset price bubble in real estate continues to loom over the macro-economy, the number of PE deals in realty and infrastructure shot to a quarter of the total, against an average 15% for the whole of 2007. On a year-on-year basis, the total number of PE deals during the first three months of 2008 stand at 124, with an announced value of $4.38 billion compared to 112 deals worth $2.98 billion announced in Q1 of 2007.
Strategic M&As however, continued to suffer. The total number of M&As announced in March stood at 33 worth $3.69 billion. The biggest deal was Tata Motors’ acquisition of Jaguar and Land Rover. Of the total, there were 13 domestic deals where both the acquirer and target were Indian firms with an announced value of $220 million and 20 were cross-border deals valued at $3.47 billion.
As in the recent past, a majority (15) of cross-border deals were outbound deals with a value of $2.66 billion and 5 were inbound deals having an announced value of close to $810 million. The total announced value of M&As during Q1 of 2008 stands at $9.64 billion spread over 125 deals as against 148 deals amounting to $33.85 billion during the corresponding period last year. Last year, some big-budget deals were announced during the quarter including Tata-Corus, Vodafone-Hutchison and Hindalco-Novelis, skewing the overall deal value.