Thanks to the two big-ticket deals, Tata-Corus and Hindalco-Novelis, domestic and overseas deals are now almost equal in value, in the first half of this year.
“The first half of this year has seen mergers, acquisitions and takeovers on the domestic front to the tune of $25.5 billion as against overseas deals worth $25.6 billion,” said associate director of Ernst & Young Navroz Mahudawala.
He was speaking at a seminar organised by FICCI on Dynamics of Growth Through Mergers, Acquisitions & Takeover.
The average size of mergers and acquisitions has grown to around Rs 300 crore recently, he added. While the telecom sector has contributed nearly 41% of M&As in India, broking and asset management have also contributed significantly in 2007. “The pharma sector contributes around 6% as the deal size in this sector is considerably small. However, the sector might have the highest number of deals among all sectors,” Mr Mahudawala said. Most of the deals are by debt method he said.
Mr Mahudawala pointed out that every two deals out of three tend to fail. When asked how did they judge whether a deal is a success or a failure, he replied the companies usually announce on the kind of returns they are expecting from a takeover or merger in a certain timeframe and their findings are based on the inputs by industry watchers and analysts.
This phenomenon of M&A is somewhat new and is at an infant stage, when we view it from an Indian context. In the recent past, M&A has become popular with Tata, Mittal, and Reliance, acquiring overseas companies giving a post to many other Indian corporates, said chairman of FICCI-Gujarat state Amit Goradia. The total value of M&A deals in India has been growing at a CAGR of around 28% between 2002 and 2006. “India ranks second in capital market inflows and fourth in M&A deals in Asia-Pacific (including Japan), as deals worth $65.033 billion were reported in the first eight months of 2007,” according to Mr Goradia.
Data compiled by Thomson Financial revealed that 121 Indian firms mobilised $23.96 billion while there were 697 M&A deals worth $41.069 billion. The buyout value of Indian firms by overseas buyers showed a jump from $3.16 billion in 2004, $8.39 billion in 2005, $10.38 billion in 2006 to $34.5 billion in 2007. The overseas buyouts by India firms slowed down to $19.98 billion in 2007 compared to $24.3 billion in 2006.
Source: Economic Times